If you're a self employed tradesperson you'll know that it's often easier to cough up than to faff with your tax. But a little bit of nous and a small investment of time could save you a lot of money when it comes to your bill from HMRC. If you don't want to cough up for an accountant to help you avoid overpayment of tax, these three tips will help you eat into your final bill, preventing you from splashing out on more than you should...
- Know your expenses
From a proportion of your electricity and council tax if you use your home as a place of work, to business journeys, credit card charges, internet bills, cost of goods bought for resale, interest on bank loans, repairs to business equipment and much more, there is a vast list of allowable expenses you need to know about in order to reduce your tax bill. You'll find a full list of expenses you need to be recording to prevent overpayment here.
- Don't forget deadlines
If you miss deadlines, you're going to be hit with unnecessary penalty fees. Don't fall into this trap. Tax returns are due on 31st January every year. Payments on account for the current year (two payments, each half the amount of your previous year's tax bill) are due on 31st January and 31st June. Be prepared!
- Spread income amongst your family
With a current personal tax free personal allowance of £10,000 it's generally more tax efficient to spread your income throughout your family. When you take on an employee (in this case a family member) and pay them a salary, you will need to pay national insurance contributions, however, in most cases these contributions will not exceed the 20% basic tax rate which will affect your earnings over £10,000. Arranging this setup will involve a little more paperwork and admin, but can really pay off if you want to minimise overpayment of tax.
Are you a self employed tradesperson? How do you avoid overpaying tax? Have you overpayed to avoid excess admin? Share your tips and opinions on self assessment with others below.