Working as a self employed contractor entails catering to the needs of a contractor that hired you for a bigger project. With that in mind, expect that you need to register for the Construction Industry Scheme (CIS) if you want to receive government-related tax benefits.
The CIS also requires you to send over your Self-Assessment tax return, your income information as a subcontractor, and the corresponding deductions made by your contractor. These are legal procedures to help calculate the remaining tax that still needs to be settled.
3 Steps for Self Employed Contractors
It might seem hard to process a CIS refund on your own at first, but there are cheap contractor accountants available to guide you along the way. If you want to know the steps to managing it as a self employed contractor, keep reading below.
1. Sign Up for the CIC
As a subcontractor who receives a salary with tax deductions, the first thing you need to do is register for the CIS. Whether you work under a company or you’re self-employed, you need to include your business name, your National Insurance number, your tax reference number, and your VAT registration number.
After signing up, most of the tasks you’ll be performing will fall under categories managed by the scheme. However, there are several jobs excluded, like carpet fitting jobs, architectural works, surveying methods, and anything that doesn’t involve construction.
If you’re not sure about the scope of your subcontractor agreement, ask cheap tax accountants to help you figure out your standing. It’s better to be sure about what you’re working for, what you’re receiving, and the taxes you’re going to pay.
2. Settle Your Dues to Her Majesty’s Revenue and Customs
After you sign up for a CIS, expect the contractor you’re working for to subtract the appropriate taxes from the salary you receive. The taxes you pay for goes directly to HMRC or the legal tax authority of the UK government.
These labour fees taken away from your income do not include commodities, like Construction Industry Training Board rates, VAT, materials, rental dues, expenditures, and other materials, which are all paid to you upfront without any rollbacks from the CIS.
If HMRC finds out your trading company has failed to register for CIS, your contractor can reduce up to 30% of tax from your total earnings. The same goes for using a different business name from the one you previously supplied your employer!
3. Manage Your Taxes Regularly
While your contractors continue to update HMRC regarding tax dues and returns, it’s your job as a subcontractor to keep track of your taxes daily. Hiring a cheap startup accountant may be necessary if you want to know where your money is going and to guarantee your taxes are paid on time.
Aside from that, your employer will present you with a tax deduction certificate that you need to keep safe because you’re going to use it for future verification purposes. It will also serve as your proof as a subcontractor that you complied with the tax reductions for CIS.
Being a self employed contractor means that you should accomplish a Self-Assessment tax return. You’re also supposed to provide your income and expenses, and any tax deductions made under the CIS.
If there are any discrepancies, you can file for a refund due to exceeded tax orders. This is where a professional and cheap accountant comes into the picture, as they can help ensure that you’re paying the proper tax and receiving the right salary!
Are you looking for cheap accountants for self-employed individuals in London to guide you through your accounting needs as a subcontractor? Cheap Accountants in London offers personalized accounting and taxation solutions to individuals and businesses. With 40 years of combined experience, we can guarantee quality and affordable bookkeeping and accounting services. Get in touch with us today to receive an instant quote!