Tax for contractors explained

When you set up your contracting business, you have an awful lot of things to think about: developing your business plan, getting financial backing where appropriate, and developing and servicing a client base. As a contractor, one of the most important parts of running your own business is getting your taxes right.

If you are working on a contract basis between different organizations, then your tax situation can become quite complex to deal with. Here are some of the liabilities you will have to face up to if you set up as a limited company as opposed to an umbrella company – more on umbrella companies shortly.

Value added tax

If your turnover annually is £82,000 or more (it often changes in each government budget), you must register for VAT, though if it’s less, you could register for the Flat Rate VAT scheme, which could save you money if you’re a first year business. There can be hefty penalties if you don’t register but should and if you are late to pay your VAT.

Corporation tax

You pay this on your annual profits. You accountant will register your company for the tax, prepare your accounts and submit them. You need to pay your CT within nine months of the company’s year-end.

National insurance

You will be liable to pay NICs (National Insurance Contributions) on all salaries you pay your staff. You will have to pay it for yourself as well, depending on the level of your salary. You could choose to pay a salary below the threshold of contributions and make it up with dividends.

Dividend tax

If your company pays you a dividend and the income is less than the higher rate of income tax, you don’t pay tax on it, nor do you pay NICs.

Income tax

As an individual limited company contractor, you need to complete a self-assessment form every year, with the return being submitted each year by January 31. It’s possible, dependent on your circumstances, that you could have to make payments on account towards your tax liability in the current year.

Umbrella companies

These are very useful vehicles for contractors dealing with many other issues in their business. Essentially you become an employee of the umbrella company and are taxed exactly as if you were a traditional employee. You can make deductions for the fee for the umbrella company as well as aspects such as pension contributions. The rest of your income is then taxed at standard Pay As You Earn (PAYE) calculations. You’ll also have to pay NICs on that income.

Payroll will be processed on your behalf by your umbrella provider, and all deductions will show on the pay slip. It takes a lot of administrative work away from you and gives you more time to dedicate to building up and developing your business.

An umbrella company can also supply all necessary insurances and full statutory employment rights.

Planning for the future

Tax is a tricky business and it’s easy to get things wrong accidentally, leaving you open to penalties. Using the professional services of an umbrella company can remove that burden of worry.

Tackling substance abuse in a small business in order to improve profitability

Employee substance abuse is nothing new. Some people misuse alcohol, illegal drugs or prescription drugs every day. The effects of substance abuse can on the workplace is being understood more and more. Many jobs these days require employees to be bright, alert and have fast reflexes. If someone has been abusing substances and tries to do their job, there is a chance that a serious accident could happen, or at the very least, that the job will be performed inaccurately and below standard.

What is employee substance abuse? 

Employee substance abuse is when an employee misuses either legal or illegal drugs or alcohol in their own private time or while at work. This can cause many issues within your workplace and can cause problems in many areas such as:

  • Reduced productivity and performance from hangovers or the after effects of substance use
  • Having sick days frequently due to substance abuse
  • Lack of attention and concentration due to preoccupation with getting and using substances while at the workplace
  • Committing crimes by selling or buying illegal drugs while at work
  • Stress and anxiety from the abuse of substances by an employee’s love one
  • Health and safety risks

All these issues can affect health and safety, productivity, efficiency and profit within your small business. If people are working with dangerous equipment that requires them to be highly concentrated, there is a huge risk to health and safety regulations being carried out by that person. They are more likely to cost the company money through sick days and will slow down the rate of productivity within your business, therefore affecting profit margins.

How can employers avoid substance abuse in the workplace? 

As an employer, you can try to avoid substance abuse in the workplace by carrying out regular drug testing on your employees. Employers and their staff can work together to create a clear policy in regards to what behaviour at the work place will and will not be accepted. By creating an Employee Assistance Programme, employers can help any member of staff who needs help to avoid or recover from substance abuse.

Drug and alcohol testing in the workplace

Drug and alcohol testing can be part of your health and safety policy as well as a duty of care to your employees. There are several ways the test can be carried out such as with an oral fluid lab test, urine or hair sample. This is then sent for laboratory testing at an audited and accredited laboratory where the results will be found. The advantages of drug testing in the workplace is that it is clear for all staff within the company that drug or alcohol abuse will not be tolerated behaviour for health and safety reasons, the wellbeing of other employees and the cost to your company.

It is important to tackle substance abuse within the workplace and clearly communicate with your employees regarding this matter, as well as offering them help and support should they need it.

Short Term Loan Facts

There are times when the unexpected happens which is the best time for a short term or payday loan.These types of loans are an effective and beneficial option that gives people instant money. If you’re in a financial bind a this kind of loan is a quick solution. You can easily apply for a payday loan online from the comfort of your home. There are many lenders that offer loans at a wide variety of different rates and terms. The biggest factor are the high interest rates.

Here is a list of things you need to consider before applying for a payday loan:

Research several different lenders. You can do this online by search for “payday lenders”. Be sure to make a list of the pros and cons of each lender.

Check out the lending process and become familiar with the requirements that are needed to obtain the loan. You can get approved by most lenders without going through any of the more traditional lending requirements such as collateral, credit checks, paperwork, etc. So be sure to choose a lender which doesn’t require that type of process.

Be sure you know the amount you need to borrow and how long the repayment terms are and if it fits comfortably into your budget. The amount of the loan and the repayment terms can help you determine which lender is right for you.

Check the list you made of several different lenders to find the one the best suits your needs.

When applying for a loan online be sure to complete the application giving all the information that is needed. The more information you give the faster your loan can be approved.

Include proof of income from your job and any other source of income. Again the more information you give the faster your loan can be approved.

Be sure you read all the paperwork the lender includes and that you thoroughly understand it. Ask questions if you have any doubts or don’t understand the paperwork completely. Also be sure to read the fine print since this is where you will find the details of the repayments terms, interest rates, and fees.

Read all paperwork that is associated with the repayments terms especially including details about should you need more time past the due date to make a payment. This part is where the interest rates and fees can double when you ask for extended time.

These are the steps required for a payday loan. If you follow these steps and submit all the required paperwork the process will be quick and easy.

Mortgages for Older People

The media have reported an increasing number of cases where older people are struggling to find mortgages. These are credit worthy borrowers who along with other groups such as the self employed or contract workers have become known as mortgage misfits.

Changes in mortgage regulation, called the Mortgage Market Review (MMR), introduced new rules on affordability. This requires all mortgage lenders to fully assess that every mortgage they provide is affordable. However, some lenders have decided to restrict mortgages for older people as they cannot fully establish if the mortgage is affordable in retirement. This is not just impacting those wanting a mortgage in their 50s or 60s, if you are aged 41 and want a 25 year mortgage a number of lenders may not accept you. Lenders with these restrictions generally will not permit a mortgage term that exceeds the age of 65.

ICM Unlimited conducted recent research in this area on behalf of Ipswich Building Society, this identified that 39% of mortgage holders were concerned about the availability of mortgages for older people.  In fact of all the age groups 45% of the youngest group (20 – 29 years olds) said they were concerned about access to mortgages for older people.

A more significant issue was that 45% of respondents held concerns that as they got older they would end up paying more than younger people.

Why are some mortgage lenders refusing to offer mortgages to older people?

Lenders that have decided to limit their mortgage lending to people under the age of 65 state difficulties in confidently assessing their affordability. This often means that they cannot guarantee the retirement date or value of a mortgage applicant’s future pension. Whilst this may be difficult and not guaranteed, neither is a salaried occupation. What may appear to be a lack of common sense being applied is probably driven by these lenders using automated systems. These are incapable of handling situations that are not in their process flow or are based on a degree of likelihood, as opposed to 100% certainty. Furthermore, employees using these systems are restricted to only following the computers’ answers.

So what can you do if you need a mortgage for over 50s?

If you need a mortgage that goes beyond your 65th birthday then there are some mortgage lenders who will consider you. Smaller, regional building societies tend to specialise in this area of lending.  They use people and not computers to make their lending decisions. This means they can assess mortgage applications individually and on their own merits. This is ideal for those with unusual incomes, pension income or unusual circumstances. This approach can be beneficial for those needing a mortgage for older people.

2 quick tips if you are looking for a mortgage into retirement

  1. A quick call to ask the lender’s maximum lending age will help you determine if they will lend in your age bracket. You can watch this video to find out more about one lender’s retirement mortgage programme.

  2. If you’re not sure or would like help to find the right lender for you, a mortgage broker could be an idea. They may charge you a fee for their advice.

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Top 5 Reasons for Borrowing Money

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An infographic looking into the reasons why people borrow money – whether it be for a car or home improvements. Currently in the UK we borrow on average £3326 per household, over a term of approximately 5 years. We look to high street banks, peer to peer lenders and guarantor lenders for the majority of our borrowing.

Know Your Financial Terminology

One of the biggest problems people have with their finances in todays economy, is their lack of understanding of the subject. Financial terminology is designed to be confusing, and bank employees speak in their monetary argot, just so they get the sale that suits them, not the product or service that suits you.

Okay, maybe it is not that cynical, but we can agree that there are far too many terms, variations and categories of finances to fully understand. It can be helpful to your financial security if you took the time to obtain a better understanding of what your bank account or your savings account entails exactly.

Here is a quick breakdown of some of the more common occurrences that you may come across.

Standing Order

One of the terms that you are likely to hear in a bank, particularly if you are paying bills. A standing order is a way in which you can regularly pay companies etc. that will be requiring payment from you on a weekly/monthly basis.

It is very similar to a direct debit, but you set up a Standing Order yourself, and it works on your terms. You control how much will be paid, when it will be paid and when it should finish. Though, as with a direct debit, you are also responsible of making sure there is enough money in the account to pay the recipient.

Credit Rating

Something that is going to be with you the rest of your life is your Credit Rating or Credit Score. You will need to know what this is and how it works particularly if you are looking to borrow money or take out a line of credit.

Fundamentally, your credit rating is a score based on your ability to meet your financial obligations. It is derived from your previous dealings and other factors such as your employment status.

Banks used to work in the way of personal relationships or reputations was enough to take out a loan, but no longer. If you want a loan, a credit card, a mortgage, anything along these lines, you’re going to have to have a polished credit rating, otherwise, you may be turned away.

Compound Interest

If you’ve got a savings account or an existing loan for example, you’ve probably heard the term compound interest – it’s what increases your savings, or increases your loan.

For a savings account, it is calculated by finding the sum of all the money you have paid into your account (your capital) year on year (usually.) So, interest for year 1 is based on the running total for year 1. Year 2, the interest is based on the running total of years 1 and 2, and so on.

It works the same for credit. It takes what you owe, applies the interest, then the next period it is added to the sum of those two.

It can be difficult to grasp, and there are formulas used to calculate these totals, which you might want to take a closer look at.

Secured & Unsecured

You might hear these if you’ve applied for a loan, but you might not have known the difference, which is understandable.

When borrowing money, there are two options, you guessed it, secured and unsecured. So, a secured loan is when you are a homeowner and the loan is put against your house, ie it is used as collateral. An unsecured loan is when you are not a homeowner and this is where the credit rating we talked about earlier will come into play.

This is of course a straight forward explanation, but there is more out there explaining the differences between secured loans and unsecured loans.

 

These are just some of the more common terms that you may encounter on your fiscal journeys, but as I said, there are many more out there. It really is worth familiarising yourself with the ones that you feel you may come into contact with at any point in the future.

Smart Money Saving

Just because we’re well into the first month of the year doesn’t mean we can’t make some changes in how you spend and save money in 2015. Getting over the festive season is always a painful experience but maybe now that you’re in the throes of it, you can think of creative and effective ways to spend your money so that you’re not in the same position 12 months from now.

52 Week Saving Challenge

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This challenge is supposed to last over 52 weeks but of course, you can alter it to your own timeframe and even the amount of money you’re putting away at a time – this can be the money to tide you through Christmas this year (so you don’t need to touch your wages) or to tide you through January so that you can spend in Christmas without worrying. As well as this, it encourages smart, affordable and step-by-step saving to ease you into what could potentially be a habit of a lifetime.

Coupons, coupons, coupons!

It’s a tried and tested way of saving money and, if you have the patience and know-how, it can be highly effective. Coupon websites, cut outs from magazines and newspapers and money-off codes seem like pennies but pennies add up to pounds and very fast! There are plenty of sources out there and, as a bonus, always keep notes of how much you’ve saved and see how that could be spent far more efficiently!

Get a cash ISA 

Cash ISA’s are a great way of saving money and when there’s a 40 day notice required for access, you may second-guess whether you really need the money you’ve put away. As well as this, the interest that can be gathered within ISA’s can go towards the big things like mortgages, cars and dream holidays.

Enter competitions

This sounds a little wacky but it’s actually becoming a very popular and interesting way to make money! A lot of the competitions you can find online offer small things like beauty essentials right up to £1000’s in cash and holidays. It takes a little perseverance but it’s usually very easy to do and could end up making a huge difference to your life.

Ditch the mobile phone contract

Way back when, phone contracts were a better investment solution than pay-as-you-go deals. However, as time has passed, phones have gotten far more advanced and intelligent leading to far more expensive phone contracts. The average contract is over £30 a month, phone inclusive and over a 24 month period, that’s a hell of a lot of money. Usually more than the phone would have cost in the first place! With rival prepay companies like GiffGaff offering more affordable payment plans with no ties. Their most expensive deal is £18 p/month for a 1,000 minutes, unlimited UK texts & 5GB of data. Similar to GiffGaff are Lebara who offer cheap international calls.

Finally…

Whatever you decide to do, make sure it’s something you can actually achieve. Changing the way you spend and save money is a constant work in progress and there’s no use in jumping in at the deep end- start small, work your way up. You’ll soon find that looking for bargains, corners that can be cut and cheaper ways to do the things you love will become second nature to you.

The Ongoing Payment Protection Insurance Scandal & You

As the ongoing payment protection insurance (PPI) scandal leads to more and more people claiming back the fees on policies they have been mis sold, so the lenders in the UK continue to suffer. Indeed, the collected lenders involved in the scandal have had to set aside many billions of pounds to cover the cost of repaying mis-sold fees, and many in the industry believe the eventual cost of the PPI saga will be colossal.

Payment Protection Insurance and You

The payment protection insurance scandal came about when a number of allegations of mis-selling were investigated by the powers that be. This uncovered widespread mis-selling within the industry, and a full revision of the regulations was deemed to be necessary. Fines were also levied on the main protagonists, and the High Court eventually ruled that fees on mis-sold policies must be repaid. The regulations regarding PPI are now geared towards protecting the consumer, and if you think you have a valid claim you should consider getting things underway as soon as possible.

Can I Make a PPI claim?

If you have taken out a mortgage, loan, credit card, car finance or other type of credit in the past few years, it is very possible that you have a PPI policy (whether you already know about it or not!).

PPI is also known as Loan or Credit Protection Cover, or ASU (Accident, Sickness and Unemployment Cover).  Essentially its an insurance policy designed to cover the repayments in the event you are not able to pay due to sickness, injury or loss of job.  In itself, the policy is not problematic, it’s the way it was mis-sold that is the scandal.

People were automatically opted in to the policy, with or without their knowledge, and some were told it was mandatory.  Others had it sold to them despite their employment status (of self-employed or retired) meaning that they are not eligible or suitable for PPI, and therefore it was a complete waste of their money.  Legally, at point of sale, customers should also have been given the option of looking at other PPI deals, not only having to take the one offered by the lender.  These are just some of the examples of the mis-selling that was common.

You should check your original paperwork for PPI, though if you don’t have that to hand you can check over your credit file for details of all your previous credit agreements.  If you suspect you had PPI and think it was mis-sold, you should seek advice to see if you can claim.

How to Make a PPI Reclaim

You may wish to make your payment protection insurance claim with the help of a claims handling company such as ours at www.haveigotppi.org.uk.  Our team of experienced advisers and claims handlers are waiting to help you in any way we can. We can handle your claim on a no win no fee* basis so you won’t pay if you are not successful, and we give every case the individual attention it deserves. With an industry average repayment of £2750 per policy it is certainly worth getting things underway, so get in touch if you want to claim back your mis sold PPI charges.

We have already helped lots of people make successful claims and we are confident that, with our experienced team of claims handlers, we can help you, too.

3 Unorthodox Investment Methods that Have Low Financial Barriers to Entry

Here it 2014, it can be difficult to make ends meet. Although Chancellor George Osborne tells us that he is looking out for everybody, it is clear that large amounts of the population are being left behind. What this means is that if you want to have that little bit of extra money in your back pocket at the end of the month, you’re going to have to take matters into your own hands and generate a second income.

If your current job isn’t making you enough to meet your needs, a good solution is to invest some of your salary each month into a project that will help you live the life you want to live. With that in mind, we’ve thought of three not-so-generic ideas that all have low financial barriers to entry, meaning that you don’t need to have a lot of start-up capital to implement one of them.

1 – Hobbyist Collecting
Whether you’re passionate about china dolls, comic books or wine, your hobby can quite easily be monetized to allow you to make that second income. If you do what you love and sell what you’re passionate about, you’ll be far more invested in your business than if you were selling something completely outside of your interest, and furthermore, you’ll be able to answer the questions of your customers in detail and with a real zeal.

2 – Pawning Antiques
If you have an eye for antiques or you simply have a loft full of old pieces of furniture and ornaments, you could turn your hoard of old items into cash by pawning them at a company like H and T Pawnbrokers, where you’ll be able to watch your old possessions transform into cash. To keep this up, you will need to replenish your collection of antiques regularly, and to do this, places like car boot sales and second-hand sites like Gumtree are your best friends.

3 – Creating an e-Shop
Finally, an online shop can be a straightforward way to generate some money on the side. An online platform like Etsy or eBay will help you to present your store in a professional manner, and with just a little bit of knowledge you can create a cohesive brand identity that will allow people across social media platforms like Facebook and Instagram identify your products from everybody else’s.

So there you have it: some low-cost investment methods that are relatively unique and can help you generate the side income you need.

The Best Way to Invest When You Can’t Afford a Second Mortgage

It’s a well-known fact that bricks and mortar is one of the safest, most lucrative ways to invest your money. Whether you’re buying a property to manage and let out to tenants for a long-term monthly income, or perhaps you’re more straightforwardly buying a second home, fixing it up and then selling it on with the aim of making some money back on your investment, the property market has always been there for anybody looking to invest without having to turn to the alien world of the financial markets.

The Problem with Property
The problem is, to be able to buy that second home, you’re going to have to be able to afford the second mortgage that comes with it. This is a challenge to begin with unless you have thousands of Pounds saved up, but it has become even more problematic in current times due to the number of foreign investors who have turned their attention to the UK’s first-time buyer housing market, driving up mortgage prices.

So, the question is, is bricks and mortar the only option for those of us who are looking to invest in something reliable, safe and productive, that will allow us to enjoy our golden years. We all know that a state pension simply isn’t enough to enjoy yourself on, so ho can we supplement this when the property market – our go to market – has too high of a barrier to entry.

Private Versus Self-Invested Personal Pensions
If you work, it’s likely that your company offers a pension scheme that automatically places money into your personal pension, but the sad fact is that these pension schemes are unlikely to accrue much interest on their own. In addition to this point, personal pensions are extremely limited in terms of the options that they facilitate. For example, you can only draw an agreed amount from your personal pension fund each month on a certain date – there’s no real flexibility.

In contrast, a self-invested personal pension (otherwise known as SIPP) available from providers like James Hay can be drawn from whenever you like, and at the amount you’re looking to withdraw. With a SIPP, then, you could save enough to purchase that second mortgage after all, whereas with a personal pension fund, this is unacceptable.

So ultimately, a SIPP could be a solution to the problem of the inflated mortgage prices we are seeing up and down the UK. Therefore, investment in a SIPP could be a wise decision.