How Business Tax Accountants Help the Self-Employed

The London tax system is notoriously complex for people in self-employment and small businesses, especially so for new startups. In traditional employment taxes are something of an afterthought as they’re taken care of through Pay As You Earn. But when you’re self-employed, having responsibility for the preparation and submission of your filings and ensuring tax compliance with HMRC regulations can be challenging.There are four main types of tax that self-employed people can pay depending on various factors such as their turnover and business structure. In this post we’ll explain these taxes and how a business tax accountant can provide invaluable support and guidance.

Self-Assessment Tax Returns

Through your annual Self-Assessment tax return you report your income to HMRC, calculate your income tax liability and then must pay any taxes owed. The vast majority of self-employed people will have to submit a Self-Assessment tax return and you can check if you need to on the HMRC website.

Working with a business tax accountant helps to ensure accuracy as they will validate your record-keeping and tax calculations so that they are accurate and also submitted on time. This massively reduces the risk of incurring any penalties from HMRC.

Tax regulations are fluid and by working with a business tax accountant you can be confident that they will keep abreast of any legislative changes to help ensure compliance as well as leveraging any available deductions to reduce your tax liability.

Dividend Tax

If you’re a Director or Shareholder in a limited company, you can use Dividends as part of your remuneration strategy. Dividends are company profits after tax that are distributed amongst Shareholders as a reward for their investment in the company.

Dividends received above your dividend and personal allowances are taxed, but at a lower rate than income tax on salary which means that with the right structuring of your income, significant tax savings can be made. This is something that a business tax accountant will be able to offer expert advice on to ensure that you extract your income from your business in the most tax-efficient manner.

This does increase complexity, however, as you’ll be paying different rates of tax on different income sources which are reported to HMRC through your self-assessment filing, but a business tax accountant will ensure that this is done accurately.

Value Added Tax (VAT)

Value Added Tax (VAT) is a consumption tax that VAT-registered businesses levy on sales of their goods or services, though some items and services are VAT exempt.

The VAT threshold is £90,000 so any business with an annual VAT-taxable turnover above this amount must register for VAT with HMRC. Businesses with a turnover below the threshold can register voluntarily if they so wish.

A business tax accountant will be able to provide support with regard to your VAT obligations including whether it’s beneficial for you to register voluntarily. They will also be able to advise you whether the standard rate, flat rate or annual accounting VAT scheme is the best fit for you and get you VAT-registered.

Once registered they will assist with the preparation and submission of your quarterly VAT returns ensuring that they are accurate and timely and that you’re compliant with the regulations. In addition, they’ll ensure that you reclaim any VAT where possible.

Corporation Tax

Limited companies pay Corporation Tax on their profits, unlike Sole Traders and Partnerships who are taxed through self-assessment. Corporation Tax rates vary depending on the amount of company profit.

A business tax accountant will assist in the preparation and submission of your annual Corporation Tax return to ensure it is submitted to HMRC accurately and on time. They will also help you from a tax-optimisation perspective by identifying any allowable expenses that have been incurred wholly and exclusively for the purposes of running your business.

By identifying all available deductions, they will help you to lower your taxable profit which means a lower Corporation Tax liability and more retained profit in the business.

How Business Tax Accountants Can Help

Working with a business tax accountant will ensure that all your tax obligations are met and that you’re compliant with HMRC regulations. In addition, they will help you to operate as tax-efficiently as possible to maximise your take home pay. You’ll of course pay a fee for the service but this can be more than mitigated by the tax savings made.

Completing tax returns can be both challenging and time consuming for the self-employed and a business tax accountant eases the pressure in this regard. Self-employed people will have peace of mind that their tax obligations are being expertly managed and an accountant will also save them a significant amount of time which can be focused on core business activities.

But CWF Digital Accountants are much more than just a business tax accountant. When you appoint us, all your business and personal accounting needs will be managed expertly by your own dedicated accountant. In addition to the management of your tax affairs, you’ll receive unlimited support and tailored advice on all facets of your business finances including strategic financial planning, cash flow management, budgeting and forecasting.