There are many different types of insurance available for freelancers and contractors, many of which are advisable only for specific fields of work. One form of insurance which is almost universally recommended is Professional Indemnity (PI) insurance.
After all, if you make a costly mistake at work – who ya gonna call?
If you have read our guide to the expenses freelancers can claim the following guide gives some in depth information on how to claim your business expenses.
More gloomy economic news for freelancers and contractors this week. A study commissioned by Capital One at the Warwick Business School has estimated that a full 25% of micro-businesses (that’s businesses with 10 employees or fewer, a group which includes freelancers) will go under before the end of 2014 – and 16% will fold in the next twelve months.
Project Merlin, the Government’s scheme to encourage the UK’s biggest banks to lend money to freelancers and small businesses, has proven something of a lame duck.
Research by the National Employment Savings Trust (NEST) has revealed that one in three employees is put off saving for retirement due to the confusing jargon that exists.
HMRC has announced that a record-breaking 90.4% of those required to submit a self-assessment (which includes all freelancers) did so on time – a total of 9.45 million people. Of those a record number were also filed online – 80.9%.
We’re the first to bemoan to all-too-common issue of late payments to freelancers from large corporates, and we do. Often. Now we have been joined by the Telegraph, who have highlighted the problem and claimed that the way large businesses delay payments to small and micro-businesses effectively amounts to using us freelancers as a free source of credit.
IR35 is a perennial pain in the rear-end for the freelancers and contractors of the UK – not least because it is so opaque. We recently covered all the IR35 twists and turns in 2011, and now we bring you news of 2012′s first IR35 malfeasance.
The choice between sole trader and limited company is one of the most fundamental faced by any freelancer. Do you incorporate, deal with the extra bureaucracy and keep more of your money as a reward? Or do you stay a sole trader, pay a bit more tax but not have to deal with Companies House?
Good news everyone! HMRC, in the face of a crippling strike from the PCS union which will see 80% of their call centre staff walk out on January 31st, have taken the decision to extend the deadline until midnight on Thursday February 2nd.
With the self-assessment tax return deadline looming, HMRC is facing embarrassment as thousands of their call centre staff are poised to stage a walkout on January 31st.
There was a ray of hope for premises-seeking freelancers yesterday when David Cameron announced that the Government would be offering up its vast inventory of vacant office buildings to small businesses and entrepreneurs at subsidised rates, making a dedicated office space suddenly a more realistic proposition.
HMRC has taken a lot of stick for its late filing penalties recently – and rightly so. The fines, which can easily run into the thousands of pounds for small businesses (even if they do not owe any tax) are completely out of step with those levied at companies orders of magnitude larger.
HMRC is not having a good start to 2012. The Independent has published a piece highlighting HMRC’s late filing penalties, which were deemed illegal by Geraint Jones, QC in a Tax Tribunal last September.
Last year HMRC was criticised by a report from the Treasury select committee for it’s over-reliance on online services, as these apparently put those without internet access or technical knowledge at a disadvantage. Never one to not ignore criticism, HMRC is pushing ahead with plans to move all VAT submissions online as of April this year.
HMRC yesterday launched a pilot of an Alternative Dispute Resolution service for SMEs, which aims to reduce to need for tribunals during HMRC’s compliance checks. The scheme, which was trialled last year and saw 60% of disputes either fully or partially resolved, involves independent facilitators who work with both HMRC and business owners to ensure a quick and fair outcomes for both parties.
We covered with some degree of disbelief last year how the Government’s National Insurance Holidays scheme, designed to give new employers tax relief when taking on their first employees, had managed to attract a pitiful 1.8% of expected participants. Now the Labour party have renewed pressure on the Government to expand the scheme or abandon it altogether.
Many freelancers and contractors choose to complete their self-assessment themselves – if you can manage basic bookkeeping tasks you’ll probably be able to get your head around it. If you’ve decided to go the DIY route there are some deadlines to be aware of.
HMRC has been taken to task today by Conservative MPs and business leaders for their preferential treatment of large corporates, while attacking small and micro businesses through their Business Record Checks. The scheme will result in fines of up to £3,000 for freelancers, contractors and small businesses who cannot provide paperwork to back up the claims made in their tax returns.
Ubiquitous online payment service PayPal has found itself in hot water again this week for shutting down a charity drive being run by comedy website Regretsy in order to buy disadvantaged children Christmas presents. According to the eBay-owned company, Regretsy was incorrectly using PayPal’s “Donate” button, and in response has frozen their account, ordered them to refund all donations and is, naturally, hanging onto its processing fee.
Late last week HMRC issued a warning to those plying their trade online – pay your VAT or face stiff penalties and possibly criminal proceedings. The warning comes on the back of the prosecution of one Gregory Allnutt of south-east London, who was found guilty of evading £420,000 in VAT on good he sold via his website.
Joy of joys, it’s Christmas party season again! Time to don ye now some gay apparel, get some business cards printed and make sure you can fit all those important client parties into your schedule.
As we’ve covered extensively, HMRC has been upping their game with regards to tax evasion and avoidance in the last year. Be it their bookkeeping crackdown, their various VAT amnesties, or their closure of offshore loopholes, the taxman is on the war path, and if you’re not paying the correct tax you’re more likely than even to find yourself in his withering gaze.
We heard from plenty of people who had experienced emotional or financial trauma at the hands of bumbling accountants in our freelancers survey recently, and now a new study by The Accountants Club has provided a little colour to back up our findings.
Today Chancellor George Osborne announced, as part of his autumn statement, that the Government would be underwriting £20 billion in loans to small- and medium-sized businesses in an effort to get the UK’s private sector moving again through easier access to finances.
The Bank of England (BoE) governor Sir Mervyn King has stated that banks should be offered financial incentives to encourage more lending to struggling small businesses. Speaking at the Treasury Select Committee about the BoE’s decision to inject £75 billion back into the economy, Sir Mervyn King urged MPs to address the lack of lending to small businesses in the UK.
As we reported a few months ago, payments to small businesses are taking longer than ever. Research by payment infrastructure behemoth BACS found that the average payment period was a rather lengthy 52 days.
A valuable lesson today from the good folk at Her Majesty’s Revenue & Customs on the importance of filling out paperwork correctly. Having sifted through employee PAYE submissions for 2009/10, HMRC has found the the UK is apparently home to no less than forty people aged over 200.
New research has found that more than a third of small businesses would consider relocating in order to help cut costs. The study was carried out by Make It Cheaper, a price comparison site for businesses, and the Centre for Economic and Business Research who identified the cheapest and costliest regions in the UK to run a business.
Did you see the BBC Panorama programme last week, All Work and No Pay? As the National Minimum Wage increased to £6.08 on 1st October 2011 (for workers aged 21 and over) Panorama discovered that many British workers are still being paid much less than the law states
While the UK’s largest banks remain largely unaccountable for current financial quagmire they’ve dumped us all in, consumers are at least given one stick to beat them with – complaints figures from the Financial Services Authority.
The Agency Workers Regulations came into force on October 1st (this past Saturday). All temps, agency workers, and some umbrella company contractors now have the same rights as full-time employees after twelve weeks of service.
There has been a lot of talk about Groupon recently as they prepare to go public in the US. Officially recognised as the “fastest growing business ever”, Groupon has attracted an audience of hundreds of millions of bargain hunters, all looking to take advantage of time-limited local deals, which Groupon source through small businesses.
Money is a very emotive subject. Money is also very psychological. We each choose how we spend our money. The more one earns the more one theoretically could and should save. The same is true of spending. In both cases, it is all relative.
While there may be mixed messages surrounding the profitability of commercial activity on Facebook, the social network’s primary source of income – targeted advertising – is still a sound option for those looking to purchase banner ads to promote their business. Facebook is now planning to give away free adverts to small businesses in the US.
As freelancers, we can afford to be flexible with our pricing and choose whether to be paid on an hourly, weekly or project based rate. We can offer discounts, increased rush job rates or even work for free if we choose.
For the last few weeks the good people at Her Majesty’s Revenue & Customs have been running a VAT registration amnesty (called the VAT Initiative) for those earning above the VAT registration threshold who have not yet registered. We’ve written about the scheme before, but as the amnesty comes to an end in just 10 days, we thought it might be a good time for a reminder.
Although some freelancers may find it more difficult to obtain a good credit card than a full-time employee, there’s a lot of disinformation flying around about freelancers and credit cards. Here we’ll bust three common myths.
Five plumbers have been arrested and around 600 are under civil investigation by HM Revenue & Customs (HMRC) for failing to pay the right amount of tax. The arrests and investigations have taken place during a campaign targeting plumbers which invited them to put their tax affairs in order.
Back in February, as part of their penance for almost bankrupting us all, the UK’s five biggest banks entered into Project Merlin, a scheme by the Government to allow better access to credit and loan facilities to UK businesses.
Could the real reason for the delay in UK businesses receiving tax payment reminder letters be that HMRC ran out of paper?
The Association of British Insurers (ABI) has calculated that the cost of this weeks riots could be as high as £500 million. But what will be the cost to small businesses?
After being blasted for their performance in 2010 in a report from the Treasury select committee, HMRC Chairman Mike Clasper has issued a public apology, and has pledged that the taxman’s performance in 2011 will be radically improved.
HMRC staff are to begin calling new businesses to offer advice on how to correctly take care of their bookkeeping and tax obligations. HMRC is referring to this new practise as “telephone education”, and businesses will be contacted “at key stages in their lifecycles”.
The decision by the Payments Council to not abolish cheques has been welcomed by small businesses who were concerned that no alternative viable payment system has been proposed.
Many Contractors choose to use the services of an existing ‘Umbrella Company’ – they are limited companies that employ Contractors. If you choose to do this, your contracts will be treated for tax purposes as if they are all inside IR35.
The British Chambers of Commerce (BCC) has carried out a news survey that reveals sole traders are being deterred from becoming employers due to the expensive cost of employee pension plans, sick leave and dismissal rules.
Research by professional advice website Unbiased.co.uk has revealed that more than half of sole traders could be missing out on tax savings by not utilising the help of professional accountants for bookkeeping.
As part of the Government’s Red Tape Challenge a new initiative has been launched which invites small business owners to reveal their experiences of excessive red tape. The Red Tape Challenge was launched by the Government in April this year to give the public the opportunity to have their say on more than 21,000 regulations.
Following on from our article on bank charges for incoming foreign payments, some of our lovely Twitter friends asked if we could take a look at outbound foreign payment charges for those who use suppliers not in the UK. An important thing to bear in mind is that, much like with incoming payments, the recipient of your transfer may also incur charges on their end for receiving a payment from abroad.
On 1st July 2011 the Bribery Act (2010) comes into force across the UK, making it a criminal offence for an individual or organisation to offer or receive a bribe – and carries a maximum prison sentence of 10 years if convicted.
The self-employed are being urged to plan ahead in the event of being off work due to illness. The advice comes following a recent report that revealed that the self employed are among the worst effected when it comes to the financial impact of being in hospital.
Following HMRC’s recent tax amnesty targeting plumbers, those strike-happy tax collectors have launched another campaign encouraging businesses with revenues above the VAT threshold (currently £73,000) who are not currently VAT Registered to come forward to admit their unpaid taxes – and incur a reduced penalty of only 10% of the the VAT owed.
A new survey has revealed that over the last six months the issue of late payments has worsened for over a third of small businesses, compounding the evidence gathered in a recent survey by BACS which highlighted the especially bad behaviour of large corporations when paying their suppliers.
The Government is to put design at the heart of its plans for economic growth in the UK. The commitment will be made by Universities and Science Minister David Willetts at ‘Design for Growth’, a high-level summit meeting of global business leaders, leading designers and Government on 23rd June 2011.
Sometimes freelancers will find themselves doing work for foreign companies. Although this can lead to some interesting work, and the opportunity to do some travelling, it often carries with it the drawback of being paid in a foreign currency. If possible, you should always asked to be paid in your native currency, however sometimes, for whatever reason, this is not possible.
The Time to Pay scheme was implemented set up during the recession to allow businesses to defer their tax payments. Over half of requests for rearrangement concerned less than £10,000 of tax, underlining the importance of the scheme to small businesses.
Accountants who have made the transition to HMRC’s electronic filing system have been set back by news that HMRC will not be ready to accept post-31 March 2011 returns until October when it will update its online portal.
Last week the UK’s coalition Government came under criticism from the Institute of Directors, a group representing business leaders across the country, for failing to reduce the tax burden faced by small businesses.
Going freelance is a big step for anyone. It takes a not insignificant amount of confidence to leave the cosy 9-to-5 world and step out on your own, but landing that first client is a feeling like no other. However, a common problem for first-time freelancers is Invoice Anxiety. When should you invoice? What should you do if your client doesn’t pay straight away?
There was good news for micro-businesses last week as the EU decided it was time to unburden them from the heavy weight of small business accounting. Business Minister and aged Wayne Rooney lookalike Ed Davey announced that by reducing the accounting responsibilities of businesses with fewer than ten employees and turnover less than £434,000 the EU could save these small enterprises around £300 million per year.
According to research by payment behemoth Bacs, Britain’s small and medium businesses are being bent over the proverbial barrel by large corporates, who continue to be the worst offenders in terms of prompt payments. According to Bacs, half of the UK’s SMEs have suffered late payments – the average payment period being a staggering 52 days.
New research has revealed the spending habits of the men and women of the UK, and the results make for interesting reading. The study revealed that millions around Britain are squireling money away without the knowledge of their partner, but for very different reasons.
Although this does not relate to you, our honest and straight-laced freelance readers, we thought we would just fill you in on the latest HMRC initiative designed to bust the tax dodgers. Following their “amnesty for all” announcement HM Revenue & Customs have now unveiled a new tax evasion unit that offers reduced penalties for those who come clean on undeclared income.
Jon Norris | Guides,Legal,Money
It’s the freelancer’s perennial quandary – should I stay as a sole trader, or form my own Limited Company? There are advantages of both, but also some drawbacks to be aware of. Remember every situation is different – some people may choose to go Limited for the added weight it puts behind their company name, some people may choose not to incorporate to as they don’t earn enough to take advantage of the added tax efficiency.
The latest report by GlobalExpense (a ruddy huge expense management company) has found that UK businesses failed to claim around £124 million in 2010 in mileage expenses. The shortfall was largely due to missing VAT receipts, which are required to claim back any business mileage.
Now that the Budget has come and gone, and the ensuing raft of fiscal and legislative changes has passed us by leaving a sea of confused freelancers in their wake, it’s time to ask if the changes the Government made were the right ones.
IR35; what the hell is going on, apart from nothing? When an accountant first said to me “You don’t know what IR35 is?!” with a look of open mouthed incredulity, I knew right then and there it was going to be the sucky kind of litigious revelation that cost me money and possibly sanity.
Last week, the coalition Government launched a number of enterprising initiatives as part of ‘Start Up Britain.’ The main thrust of it all was to inspire the younger generation to think entrepreneurially. There are a number of ways in which they will seek to do this, but will they work?
Those of you on a flat-rate VAT scheme are in for a treat – a small treat, but a treat nonetheless. A recent tribunal ruling has deemed that HMRC charging VAT on interest gained through bank balances and savings is illegal, meaning that the practise will cease, pending a possible appeal from HMRC.
National Insurance is great. It builds up your state pension entitlement and helps pay for the NHS and other welfare services. Us freelancers pay National Insurance on a quarterly basis with the amount we pay dependent on how much we earn. Read on for a jargon-smashing guide…
During last week’s Budget, the chancellor announced that a total of 21 new enterprise zones will be created across the UK in areas in need of economic revitalisation. The idea behind an enterprise zone is to encourage investment and economic growth within a particular geographical area. Will it encourage freelancers to relocate?
Tomorrow is B-Day, when the incumbent Chancellor of the Exchequer and certified man-child George Osborne will unveil his spending and tax plans in all their glory. This budget will guide the UK’s finances for the next year, and the 2011 budget is especially pertinent for freelancers, contractors and small businesses, given the promise of IR35 reform.
If you run your own freelance business, you’ll probably appreciate the freedom that this can give you, as well as the specific challenges it can bring. You may be an old hand at it and completely comfortable managing your own schedule and financial affairs. On the other hand, perhaps you’re new to freelancing and feel a little daunted by all the things to consider.
TimothyTim | Getting a Job,Money
Lets face it; human beings are lazy, good-for-nothing bags of horny resentment and given the choice would spend every day sat in their underpants eating pot noodles and watching Quincy. Unfortunately Pot Noodles cost money so we all work and save our comfy pants for the weekend.
Contractor Advisor | Legal,Money
The OTS Small Business Tax Review, which was released last week to barely-audible fanfare ahead of the Chancellor’s Budget on March 23rd, threw up three potential changes to the way IR35 currently operates. The first suggestion was to suspend IR35 completely, the second was to amend IR35 enforcement, and the third was to introduce a definitive Business Test
With the recent various natural and human calamities in Japan, New Zealand and the Middle East, now is a better time than ever to think about donating to your charity of choice. Whether you are operating as a sole trader or a Limited Company, there are ways you can make your donations go further both for you and your Company.
Contractor Advisor | Legal,Money
As part of its report on simplifying Tax for small businesses, the Office of Tax Simplification raised two possible short-term solutions. One was to suspend IR35 with immediate effect, and the other was to keep IR35 but improve how it is administered.
If you’re a freelancer operating under a limited company, more than likely you’ll have had some kind of dealing with Companies House. The organisation are the record keepers for all public companies in the UK, and as such are what you might call a fairly widely used service.
A little while ago HMRC issued a warning about a series of email scams that had popped up in the wake of the January 31st Self-Assessment deadline. Using faked email addresses (usually rebate@hmrc.gov.uk), the nefarious scammers were informing people they were eligible for a Tax Rebate running into the hundreds of pounds, and asking for bank details to complete the transaction.
In the wake of the self-assessment tax returns deadline (and ensuing email scams), Unbiased have released their 19th Annual Tax Action Report, which claims that the tax paying UK public have handed over an extra £13.5billion to HMRC through mistakes, or by not operating tax efficiently. In a period of relative austerity, perhaps it’s time people took a closer look at their finances to ensure they’re not overpaying.
Following this morning’s disappointing launch of the Office of Tax Simplification’s Small Business Tax Review, we have now had some more time to digest the whole document, and have pulled out some more snippets that are relevant and interesting to the self-employed community.
Capital gains tax is a tax on possessions, or more specifically the increase in value of your possessions. This can apply to shares, property or antiques. The tax comes into action at the moment that you dispose of them – whether that’s by selling, or in certain cases, giving them away as a gift.
The Office of Tax Simplification (OTS) has published a report on how to simplify UK tax reliefs. It’s a long document which takes a while to rifle through, which is surely a good thing (or not, depending on how much you like reading about complex financial and legal issues).
Everyone knows it’s okay to evade tax but completely wrong to avoid it, right? Wrong. What I meant to say is that it’s okay to avoid tax but illegal to evade it. Confused? You’re not the only one. I recently saw an interview on BBC News where tax polemicist Richard Murphy had to repeatedly correct a muddled newsreader over definitions of avoidance and evasion.
Ahead of their initiative to clampdown on poor bookkeeping, HMRC has launched new free ‘tools’ to help freelancers keep their business records in an acceptable state. Rather than tools (which I think should involve a certain amount of user interaction), all but one of these are documents which outline your bookkeeping responsibilities and how to fulfil them.
While people are increasingly being refused the option to defer tax payments via the Time to Pay scheme, one professional service provider predicts that the year ahead will see the highest levels of personal insolvency on record. RSM Tenon offer the stark warning after the last quarter of 2010 saw a 24% drop in insolvencies compared to the same period in 2009.
Of course we’re not talking about you. We know the Freelance Advisor readership are bastions of honesty, purity and fiscal responsibility. We just thought we’d let you know anyway, so you can warn your less-scrupulous friends about HMRC’s latest clampdown.
Our advice about Redundancy is updated for 2011. Redundancy is a ‘fair’ means of dismissal by your Employer if the procedures they follow and the circumstances are correct. A Redundancy situation is applied when there is no more, or not enough, work for you and your colleagues (for example if your employer closes or relocates the business, or now needs fewer workers).
As with all new, exciting things, big business has been a bit slow to catch on with social media. Some businesses have “got it”, and have used social media to great effect (See the Facebook Skittles Campaign, or the genuinely helpful Heathrow Twitter feed), and some are still lagging behind – thinking it is enough to simply register an account and leave it unattended.
One month on from the 2.5% VAT increase, it seems that SMEs have managed the switch rather comfortably. Well, for the most part at least according to a poll of 1,400 SMEs by finance management software firm, Intuit.
If you’re fortunate enough to be in the South East and have a business which you think is both innovative and with the potential for considerable growth, then you might like to try your luck at landing an ‘Innovation Voucher.’ Up to 55 of these vouchers are available, at a combined total of £220,000, in random packets of Walker’s crisps.
A number of Freelancers have questioned how the National Employment Savings Trust (NEST) will affect them. From October 2012 the UK Government will introduce a new pension scheme to the UK as part of a bigger overall pensions reform strategy. Previously known as “personal accounts” NEST was announced on 7 January 2010.
It’s been a troubling week for the coalition Government and UK economy: The week started with the outgoing head of the CBI criticising the Government for hindering business and job creation. This was swiftly followed by the news that the UK economy suffered ‘negative growth’ in the last three months of 2010.
What does it all mean for freelancers?
As a freelancer it’s crucial to remain relevant and to be ready for change in any given industry. Of course, nobody likes change in the world of business. Most of us would like to stick with the same processess and skills which have got us so far, without having to worry about the future. Freelancers are effectively on a treadmill, we can’t stay still without going backwards.
Accountancy software giant Sage last week announced the disappointing news that it will not be issuing a software update to its accounting package to support iXBRL – a new markup format HMRC is mandating all electronic Corporation Tax returns use.
As you may have heard, our Government is a little strapped for cash at the moment. Because of this, they have decided to introduce a raft of measures to increase their cashflow. One of the measures being employed by HMRC is the fairly innocuous sounding “Employer Compliance Visit”. Although it may sound like a friendly sit-down over a cup of tea, what it actually means is that HMRC will turn up on your doorstep to check your books.
The New Enterprise Allowance is the subject of something of a political pissing match at the moment. Business and Enterprise Minister Mark Prisk (predictably) praised his new creation, saying it is important to foster an “enterprise culture” in the UK. Prime Minister David “Dave” Cameron also weighed in on the new measures, calling the need for support for small businesses “vital”.
A few weeks ago the loosely-held-together gelatinous blob the UK currently calls a government announced it was expanding the New Enterprise Allowance scheme to offer it to up to 40,000 new businesses. If you remember (and why wouldn’t you?) the NEA is a £2,000 grant bestowed upon new small businesses by the Government if said business meets certain criteria.
Mel Dixon | Getting a Job,Money
Despite a sense of restrained optimism from business leaders the year ahead is likely to be a testing one for the UK economy. For example, the impact of the VAT rise on SMEs is uncertain – the Shadow Chancellor believes that it will lead to 250,000 job losses. While this could work in favour of a freelance workforce called upon to fill the gaps, it may also have an adverse effect if whole businesses go bust – particularly if they happen to be your clients.
Hands up who hasn’t filed their self-assessment yet? If you still haven’t done it, then you’d better hurry because the deadline for online returns is midnight 31 January. Leaving it till the last minute is just asking for trouble!
The UK Government doesn’t seem to be too fond of Umbrella Companies at the moment. After announcing the closure of the offshore EBT loophole late last month, David Cameron’s rag-tag band of misfits has now issued a further statement on what it believes to be unscrupulous behaviour by some Umbrella Companies.
If you’re a UX freelancer (one of those front page web interface design types) you may be interested in a new survey which reveals how much you can expect to get paid in the industry. By detailing the pay of UX freelancers across varying experience levels, location and gender – this is probably the most exhaustive study of its kind.
The results offer a really useful guide for industry freelancers unsure of what rates to charge.
There is an ongoing debate about the benefits of contracting as a sole trader or working as a limited company owner. The typical scenario is for someone to start contracting or freelancing as a sole trader for its ease of set-up and small administrative burden. After increasing their earnings, they may then consider forming a limited company to lower their tax paying responsibilities and increase their attractiveness to potential clients.
This raises the question: when is a good time to form a limited company? And how substantial is the culture shift as you move from one business structure to another?
2010 has been a memorable year which has seen recognition of the freelance community rise to unprecented levels. A few things spring to mind. We’ve seen the forming of a coalition government which has seemingly set in motion a chain of events that will eventually see an overhaul of IR35. And the second ever National Freelancers Day was a huge success with freelancers across the UK going weak at the knees when Prime Minister David Cameron addressed them directly.
As many (hopefully all) of you will be aware, those good folks running the country have decided that as of today the VAT rate will be raised to 20%. While this has one distinct advantage (it’s easier to work out now – just divide by 5!), it also has one huge disadvantage – namely that from today things will cost more.
As you’re probably already aware, the VAT rate will rise from 17.5% to 20% on 4 January. Accounting for the rate change will be a fairly simple process for most freelancers and contractors, however, there are special rules which apply to certain grey areas spanning the rate change.
Are you raising an invoice after 4 January but performing a service before the deadline? Or vice-versa: are you providing goods before 4 January and raising the invoicing afterwards? Well, in such situations you get special dispensation and a choice.
There have been some interesting developments of late which shed some light on what the future holds for IR35 – the legislation designed to close the loophole which enabled people to work as independent contractors when, actually, in spirit, being more akin to an employee.
Ever since Chancellor George Osbourne announced a review of IR35 in the Emergency Budget, many in the contracting community had their hopes raised for swift action.
With recent research detailing the colossal expense and burden of niggling administrative duties (apparently we spend 37 days each year on opening letters alone!), isn’t it about time we got hold of the red tape and tore it apart with Hulk-like strength?
Freelancers and contractors can help make their lives significantly easier by offloading many of the menial tasks that blight their day. First though, you need to know when’s the best time to outsource.
As we reported on Friday, new government legislation regarding the use of offshore Employee Benefit Trusts (EBTs) by Umbrella Companies as a means of saving clients money will now be passed into law, meaning the money-saving benefits of this method will be removed come April next year.
We’re receiving news via the Freelance Advisor batphone of a developing problem with Umbrella Companies.
Umbrella Companies, for those unfamiliar with the term, are large organisations run under Limited Company rules, who deal with freelancer and contractor national insurance and tax issues by essentially “employing” these individuals in their company (hence, “umbrella”).
Recently on Freelance Advisor we covered a survey by the Professional Contractors Group (PCG) which revealed how freelancers were, on average, happier than full-time employees. Now, a separate poll has uncovered similar findings in regards to small businesses.
‘The Future of Entrepreneurship’ report also looked at how working life is set to change over the next decade. Interesting reading? You decide.
According to new research, poor communication is costing small businesses a crazy amount of money. The survey was undertaken by T-Mobile and involved over 2,000 small businesses, 86% of whom felt they wasted time talking to suppliers, customers, partners and staff.
A phone company suggesting that people talk too much? What next? EMI discovering that we excessively listen to music?
A quick PSA for all freelancers, contractors and small businesses out there in the market for a new accountant – our friends at Crunch.co.uk are having a moment of weakness and getting into the spirit of National Freelancers Day by waiving all their set-up and Limited Company formation fees for the rest of the month.
Although you may associate it with over-zealous Americans hoarding boxes of vintage 1985 Tupperware in their garage, eBay is actually a huge company (The 4th biggest web-based company in the US, no less), and a really good economic barometer. In the same way that the Big Mac Index can be used to measure the relative wealth of a country by the price of a juicy McDonalds burger, eBay and it’s web-payments arm PayPal can track a huge amount of transactions and mine a wealth of data from its users.
With VAT rising from 17.5% to 20% in the new year, it’s worth asking what effect this will have on freelancers and contractors. The impact it will have on retailers is fairly obvious, they have to change all the prices in their shops to account for this change. For freelancers, the impact is not so straightforward and will vary depending on how they do their accounting.
In a huge country-by-country survey of economies around the globe, the UK has come 17th for the ease in which people can start up small businesses. That places us behind economic heavyweights such as the United States, Australia, Hong Kong and… Rwanda.
However, the UK does fare better when it comes to the ease of actually doing business, in which case, we finish 4th.
We’re all about freelancers here (you may have guessed by the name), and helping freelancers become as successful as possible. Once that success has arrived, you’ll either go one of two directions. Firstly, you might want to turn all your hard work into a business – this means re-investing money you’ve made or seeking outside investment. Secondly, you might just want to rest on your laurels and watch the huge stacks of cash grow around you.
The UK’s freelancers and contractors will be unsurprised to hear that money is not the key motivational factor for many workers.
According to a study by the Chartered Management Institute (CMI), the ability to work flexibly and have the opportunity to develop within a business are more important.
These are two of the key reasons why people tend to go it alone and start up their own business in the first place – so perhaps even more people are on the precipice of joining the freelance revolution!
If you read our office chairs guide recently and were suddenly gripped by the desire to upgrade your current seating, we may have found just the thing for you!
If you’re a freelancer or contractor who gives free advice to friends or other casual contacts, you’d better make sure it’s well-placed.
Otherwise, if your advice turns out to be misplaced, you may find a solicitors letter on your doormat detailing how you’re being sued for negligent advice and guidance!
The proliferation of online accountancy services aimed at small businesses has opened up a debate about the benefits and drawbacks of these new fangled operations in comparison to more traditional accountancy practices.
Here we look at the rise of these services, and what impact they’ve had on the freelance workforce.
Last week the government came clean on their future plans for pension tax relief. Now we’ve had time to digest the news, we’ve called in our resident financial planner – Paul Cleworth of Wealth Matters – to give you a rundown of the changes and how they’ll affect you and your business. Here comes the science…
Well, at least that is the deadline for the paper versions. Alternatively, if you’re doing your self-assessment returns online then you have a bit more leeway. Up until January 31 in fact.
Self-assessment returns need to be done if you’re self-employed or running your own limited company.
For the freelancer who works from a home office there are a whole range of legitimate business expenses which can be claimed.
This poses the question: what are they? And how do you calculate the amount you can claim? What follows is a simple guide.
The coalition government has said that they hope to bring in billions of pounds over the next few years after announcing that more resources will be made available to HMRC.
And how are they going to do this? By targeting those pesky businesses avoiding tax through offshore accounts.
Freelancers and contractors will be glad to hear that a consortium of City financiers are planning to open a bank that only lends to small businesses.
And they’re planning to launch early next year…
Freelancing has many advantages including the flexibility to decide when and where you work.
You will also have a wider variation of work with a number of contracts and clients as well as usually being paid higher rates of pay.
However, there can also be disadvantages, especially as you are responsible for all aspects of your business including finances, sourcing work and compliance with relevant regulations such as IR35.
For freelancers and contractors who work via their own limited company, dividends can provide a very tax efficient method of self-payment.
But what exactly are they? And how do they work in practice? The following guide will give you a good idea.
It is essential to ensure your workplace is deemed temporary when determining whether you have the right to claim travel and subsistence expenses. If you are a contractor, assessing your workplace status is extremely important. There are a number of rules set by HMRC which will determine whether you have the right to claim travel and subsistence expenses whilst you work. The rules heavily focus on whether your place of work can be classified as temporary or permanent.
Working job-to-job and contract-to-contract is all well and good. But if you want to build a business you’ll need to find some cash.
Christian Nellemann, founder of XLN Telecom, shares some of his experience on how you could get your business off the ground financially.
For many freelancers and contractors finding a good accountant can be an arduous task. As a result, some small business owners end up employing the services of an accountant who turns out to be a poor fit for their needs.
That’s when you know it’s time to make a change.
Michael Rose | Money,Technology
Are slow payers crippling your cash flow? Are you spending too much time chasing overdue accounts and stifling your productivity? Spending more of your valuable time chasing payments than new customers?
There’s an app for that.
“A sale is not a sale until the money is in the bank”. It’s a great rule of thumb but it’s surprising how many businesses forget this golden rule and over-extend themselves. For many freelancers the long awaited big contract is one of the main reasons to be in business. However, whether your customer is a small business or a very large one, it is critically important to ensure they can and will pay you.
Creditsafe’s 16-page guide is crammed full of top tips for making sure you will get paid.
Despite hopes of its upcoming demise, IR35 is still alive and dangerous and remains a major concern for many UK contractors.
That’s why it’s great to hear that a new online tool has been created which gives contractors an opportunity to discover whether or not they are IR35 compliant.
Over the last month the coalition government has been taking suggestions from the public on how they can save money quickly and effectively. Some have argued for the scrapping of the digital switchover while others have suggested making MP’s use hostels rather than a have a second home.
A number of people have also taken the opportunity to argue for the repeal of IR35…
For a long time now there’s been much talk of the drawbacks and benefits of IR35. Well, mainly the drawbacks. But what of the measures that could potentially replace the complex and largely ineffective legislation?
One option which has been spoken about recently, involves the creation of a new General Anti-Avoidance Rule known by its acronym GAAR.
Michael Rose | Getting a Job,Money
Continuing our Freelance Stories series we talk to artworker and print production pro Bill Greenwood.
After 20-years working for top design studios Bill has decided to go it alone and tells us what it is like to start your own Limited Company.
Last week the Government announced a 52% cut in the amount spent on advertising and marketing, leading to 287 redundancies.
One of the few Government campaigns to escape the axe was the HMRC’s ‘paying business taxes’ series of adverts which surely reveals a determination to ensure that businesses don’t escape their tax paying responsibilities. Freelancers and contractors should be on their guard.
IR35 has been the bane of many of a contractor since it was introduced back in April 2000. Recently the controversial legislation has been garnering much media attention after the coalition government promised to review it as part of their plans to simplify the tax system for businesses.
This makes it a good time to ask: what exactly is IR35?
VAT is defined by HMRC as “a tax that’s charged on most goods and services that VAT-registered businesses provide in the UK.”
The question is: when should you be VAT registered? And why? It’s time for a no-nonsense overview to provide some answers…
New government proposals to dramatically cut tax free pensions allowance could have an impact on freelancers and contractors looking to save money for the future.
Getting sign-off, in writing, is a vital part of best practice when sending designs, copy or code to clients. If changes need to be made later then, with sign-off completed, it is the client’s responsibility — not yours. If, for example, there is a typo in a design for a flyer (perhaps the date is wrong!) and the client spots the mistake after printing 1000s of copies the responsibility for the cost of re-printing is the clients… not yours.
Find out how Professional Indemnity Insurance will defend you in cases where clients refuse to pay, or make a claim against you.
It’s a question which every prospective freelancer and contractor asks themselves before making the leap towards a more self-sufficient way of working. Should I trade as a limited company or work via an umbrella company?
Both methods have their supporters, but in this article I will bring the debate back to basics.
“Ten years after its introduction, the review of IR35 finally got underway, signaling the beginning of the end for the tax. The Government announced the terms of reference for the long-awaited review of small business tax measures. The new Office of Tax Simplification will look at the issue and have been specifically tasked with trying [...]
So, the job’s been a nightmare and the client has been excruciatingly awkward – and then when you reach the end of the project, they refuse to pay up. What do you do?
Insurance specialists Blyth Valley offer the following advice on how a Professional Indemnity policy can help…
So far, so good. That seems to be the business community’s general view regarding the coalition government.
In a recent newspaper article, award-winning entrepreneur and freelancer’s friend, Darren Fell, gave his views on why he thinks now is a great time to start a business in light of recent tax changes.
Debt collection. It’s a term which often invokes the notion of a murky underworld where burly henchman terrorise blameless innocent types, usually of a slender frame; they are often grabbed by the collar and thrown against the nearest wall.
However, if you’re a contractor or freelancer who’s owed money which is not forthcoming, how do you go about collecting it in the most civil manner possible?
For freelancers and contractors, being able to supply a client with a simple T’s and C’s document is a sure-fire way of maintaining an aura of professionalism. It’s also pretty handy in the event of a dispute.
So, what else are they good for? And how should you go about drawing them up? Insurance specialists Blyth Valley have the answers…
If you’re a designer or freelancer who is in the business of recommending materials or services to others, are you aware of the dangers you may face in doing so?
Insurance specialists Blyth Valley reveal how you can reduce the likelihood of a disgruntled customer heading straight for you with an inclination to sue…
As the dust settles after the June Budget Financial Planning Expert Paul Cleworth give us some good news for contractors.
TODO: Is a review of salary levels with your accountant requried?
Freelancers and Contractors unhappy with the Labour government’s IR35 leglislation may now be able to see light at the end of the taxation tunnel.
Before the election the Tory team were hinting that they’d “review” IR35 if they got into power, but yesterday saw the first strong commitment from small business minister Mark Prisk.
“We want to make sure that we could undertake a comprehensive review of small business taxation in a way that makes the need for the current IR35 legislation redundant” said Prisk in an interview with The Telegraph.
In May, the newly formed coalition government wasted no time in making all the right noises regarding the stress inducing IR35 ‘disguised employment’ legislation. Through a combination of squawks, growls and shrill cries they promised to “review IR35, as part of a wholesale review of all small business taxation, and seek to replace it with simpler measures…”
The question is: can we expect any statements of substance regarding the legislation in the upcoming emergency budget?
Once again the Bank of England has held the base rate at 0.5% Looking back at last months budget there was some very good news for first time buyers as a stamp duty holiday was put in place for purchases below £250,000. The government also declared a five per cent Stamp Duty levy targeting those [...]
As a contractor you may review your finances fairly often and look at your current and projected earnings to enable you to set effective budgets, for you personally and for your business moving forwards. This allows you to set future personal and financial goals, which could centre on retiring early to planning that big holiday away with your family.
These plans and your current lifestyle are supported by you continuing to work and generating a regular income. But what happens if you are unable to work due to illness? Your level of income may well fall and your financial plans for the future may be compromised.
When you’re running your own business you are the business manager, financial director, credit controller and bookkeeper. Hopefully you’ve managed to outsource your accounting needs but you still need to look at your accounts to make informed business decisions.
This week’s podcast with Sarah Thelwall from MyCake took a look at Turning Business Data into Brilliant Business Plans this post takes us a bit deeper and looks at a few types of costs that freelancers and SME’s incur so that you can gain a better idea of what ‘normal’ is.
Computer Arts readers can get a 10% discount for a year at Crunch.
Buy this month’s Computer Arts magazine and you’ll not only find the usual mix of great graphic design articles and advice you’ll also get a code for 10% of Crunch.co.uk.
The deadline for online VAT returns is drawing close. As from April 1st this year, it becomes mandatory to file online.
Businesses that do not comply with the new online regulations will face a fine from HMRC.
From April 2010, if you have an annual VAT exclusive turnover of £100,000 or more, you will have to do your VAT returns online and pay any VAT due electronically.
But don’t worry, it’s the same form and just as secure as doing it on paper.
If you haven’t already, you’ll need to register for an online account at least 7 days before you do your VAT return. All the help and advice you may need about registration and online services can be found by visiting HM Revenue & Customs’ online services demonstrator: businesslink-online.hmrc.gov.uk/login
While the effects of the recession on cash flow and business profitability are on the minds of most at present, the pending year end of April 5th 2010 provides an opportunity to ensure that your liability for the 2009/10 tax year is no greater than necessary.
In this year end tax guide, Paul Cleworth of Wealth Matters considers some of the ways you might act now to help you achieve a more tax efficient and secure future for you, your family and you business.
From 1 April 2010, if you have an annual VAT exclusive turnover of £100,000 or more you will have to submit your VAT returns online and pay your VAT electronically. Also, if you register for VAT from 1 April 2010 onwards, you’ll have to file online from the start, whatever your turnover.
Freelance Advisor and Associate Director of Contractor Mortgages Made Easy, Taj Kang, surveys how the mortgage market is looking for contractors and freelancers.
If you are a freelance sole-trader or a contractor working under an Umbrella company you may not be aware that going limited could save you money.
By going limited you can, save tax, open more avenues for employment, benefit from limited liability if you get into trouble.
Freelance Advisor and financial planning expert Paul Cleworth has been analyzing this month’s Pre-Budget report to see if there are any gems for us freelancers and contractors.
We focus on how it affects contractors, the good and bad news as well as what opportunities there are for freelancers and contractors.
What expenses can I claim?
Freelancers and contractors with limited companies can claim the following as legitimate business expenses.
Michael Rose | Getting a Job,Money
Negotiating yourself the best rate possible is crucial to your financial success as a freelancer or contractor. However, it is also one of the most daunting prospects if you have never done it before.
This guide outlines a few things to think about when trying to secure yourself the best deal.
Michael Rose | Getting a Job,Money
If you decide to set up your own limited company then you’ll need a business bank account to separate your personal and business finances.
It may sound like a lot of hassle but our quick guide shows you what you need to do.
Successful long term investment is not just about buying low and selling high. Stock markets rise and fall, and share prices are vulnerable to everything from political news to the weather. Trying to find your way around – particularly during times of high volatility and uncertainty – can feel like negotiating a minefield.
So how can we make sense of such a confusing world? It is probably time to go back to basics – stock markets may rise and fall, but the rules of sensible investment remain constant. Wealth Matters’ Paul Cleworth gives us the low down.
The Self Assessment online deadline is fast approaching – if you still need to do your Tax Return you must do it online by 31 January
If you’re using HMRC Online Services for the first time, you will have to register for an online account. You will then be sent an Activation Code within 7 days to activate your account.
Permanent employees often have death-in-service cover as part of their contract of employment with typically ‘3-4 times your salary’ as the benefit, but for contractors who are often the only person who works in their company, there has been little scope to provide similar benefits, until now.
Setting up a Limited Company is one of the smartest way to get paid for your work. With a Ltd you get to define your brand, own everything you do, run your business in the most tax-efficient way and pitch for work you wouldn’t be able to get as a sole-trader.
Some people, usually the folks at Umbrella companies, will tell you that setting up a company is costly and complicated but with low-cost solutions out there it’s a no-brainer.
In conjunction with PCG, Wealth Matters have been running a number of Contractor Seminars this year. When it comes to investing they’ve found quite a few questions keep repeating themselves among the 250-strong contractors in the audience. Today Wealth Matters’ Director Paul Cleworth answers these questions for a wider contractor audience.
Master-moaner and freelance freedom-fighter Malvolio takes a look at Tax and Employment Benefit Trusts (an alternative to Umbrella Companies that promise up to 25% more in your pocket).
Are these tax schemes a good idea for freelancers and contractors looking to earn a little more? Are they good for the UK?
This week the FSA chief executive Hector Sants outlined a radical shake-up in the mortgage market. The new proposals by The Financial Services Authority (FSA) include a ban on all Self-Certification Mortgages.
This is potentially worrying news for Freelancers and Contractors as Self Certification Mortgages were designed for workers who have trouble proving their income in a conventional manner such as freelancers, contractors, self employed, and company directors but Ian Burrows at Freelancer Mortgages Made easy actually welcomes the news…
I was following a discussion over the weekend about someone asking if it was OK to expense accountancy training as part of his role as a company owner. My understanding of any expenses, including training costs, is that the expense must be wholly and exclusively in the line of your work. So clearly you can’t [...]
The specialist freelancer and contractor-focused accountancy world is hotting up as Crunch continues to cause ripples in the sector. It’s been a busy month for Crunch with the news that the all-in-one online accountancy service has received investment from Bebo co-founder Paul Birch and Skype chairman Michael van Swaaij. Combined with news of an award [...]
You may not be thinking of retirement just yet, but it’s always worth being aware of rule changes that could impact on your pension. Paul Cleworth, Financial Planner and Director of Wealth Matters shows us freelancers and contractors how we can tee up our options…
Are you ready for retirement?
Got a great accountant but lousy software?
Or great software but an accountant who wants everything in Excel spreadsheets?
Crunch Managing Director Darren Fell explains why choosing an all in one accounting solution can save you a lot of time and hassle when it comes to your year-end.
Our friends at HMRC have kindly offered us all their PDF and Video content in widget form.
All you need to do is choose from the dropdown and you get the lastest information straight to your desktop.
Job done. Definitely one to bookmark!
Freelancing and contracting is becoming a normal work practice within our society but many people continue to work as a sole trader rather than through a limited company. Freelance Coach Daryl Close takes a look at how a limited company setup can help you
The PCG, the association that represents freelancers and contractors in the UK, has revealed the exact amount of money raised by the Government’s IR35 tax regulation rules.
Following a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 raises for the exchequer, PCG have found that between tax years 2002/03 and 2007/08, IR35 directly raised just £9.2 million. This equates to an average of around only £1.5 million per tax year – a tiny sum in Governmental terms.
Michael Rose | Money,Resources
If you’ve read the tax overview and know what to expect this guide gives you a simple to understand guide to Self Assessment, National Insurance contributions, VAT, employing others (PAYE) as well as some of the help you can get in the form of Allowances, reliefs, incentives and Tax credits.
Essential reading if you’re starting out and struggling to understand tax and self-employment.
The PCG is a non-profit organisation that fights the freelance corner by lobbying government for better tax and regulation and promoting fair and ethical behaviour among recruiters. It also provides a host of tools and knowledge to its members to help them handle tax and regulatory matters properly.
PCG insider Charlie Bradburn tells us why they could be your greatest ally if you were ever to suffer a tax investigation and how their help-line can help you feel more at ease when confronted by a letter from the HMRC.
Michael Rose | Money,Resources
To help launch our new Resources section we’ve teamed up with Business Link and the HMRC: Over the next few months we’ll be offering the latest advice, guidance and short videos from the people who know.
If you’ve recently gone self-employed or are thinking about working for yourself this first PDF guide will give you an overview of initial questions you might be asking yourself when planning on starting a business.
Here are some ideas from James Leckie from Contract Eye. Although aimed primarily at IT contractors, many of the tips can be applied to freelancers in other industries. 1. Keep an eye on your cashflow The advice is the same for all small businesses in the current economic climate – make sure you preserve cash. IT contractors [...]
Small business owners working from home should make sure they are claiming tax relief, an accounting firm says.
Target Chartered Accountants says business owners who work from home can claim several tax benefits, including mortgage interest.
Tax burden hurts small business HIGH taxes are hitting UK small businesses hard, new research has found. About 16 per cent of small business’ outgoings is spent on tax, according to financial business information firm Creditsafe. This means tax is the third biggest expense for most small businesses, freelancers and contractors, behind wages and investment [...]
Continuing our series on how an economic crisis might affect freelancers and contractors, Freelance Advisor and Web Marketing Consultant Leif Kendall gives us five freelancing tips for surviving in a recession. Before I tell you how to literally work your way through a recession, or a credit crunch, or whatever we’re experiencing, I would like [...]
With gloomy forecasts and images of screens full of flashing red numbers dominating the newspages we’ve been keeping a eye on what the state of the economy means to freelancers and contractors. And it’s not all bad news! Today Freelance Advisor and Web Marketing Consultant Leif Kendal gives us three reasons why freelancing might actually be a very good option during a recession.
The Professional Contractors Group (PCG), which represents UK freelancers and contractors, has warned the Government against “heavy-handed action” which would remove tax relief on expenses. The warning particularly concerns freelancers who work through ‘umbrella companies’ which oversee the offering of a number of freelancers’ services on large or long-term contracts. “PCG supports the presence of [...]
“I’m busy earning as a freelancer, but what about all those Pension plans?” It’s a common freelance problem. You’re hard at work earning money from contracts, but you also know you need to keep an eye out for when you’ll be less busy earning. In this new Financial Management series, Senior Pensions & Retirement Consultant [...]
The importance of a strong legal framework can never be under estimated when establishing a relationship with a customer. What are we talking about? The key fundamental within business, a contract of course! If you’re mad enough to be working for any customers under a loose agreement or worse still a verbal agreement, stop and [...]
Accounts and Audit Manager Michael Riazi helps freelancers and contractors find the advice they need. Last month Michael gave some great advice on how to find an accountant that is right for our freelance business – this month he gives us ten things we should ask on our first meeting. Before you choose an accountant… [...]
today’s current climate it is essential to choose every aspect of your freelance business dealings carefully. This applies not just to your clients and suppliers but also to your professional advisors – especially a good accountant.
The right accountant will meet all your business accountancy needs, from the preparation of accounts and dealing with tax matters, but also helping your company or business grow in the future.
Heard of it? Most have but still it manages to send a shiver or two down the spine of even the most newbie contractor or freelancer who’s not quite sure! So what actually is it? Well essentially it’s the Inland Revenue’s (HMRC) definition of ‘self employment’ and it’s designed to catch those who are [...]
