Contractor Blog Zone
We would love to hear your comments
In Part 1 and Part 2, we looked at a variety of issues that sometimes take a bit of getting used to for the new 'Limited Company Contractor'. For example, self-assessment, corporation tax, bookkeeping, annual returns, dividends and company accounts. As a CEJ client, you're welcome to as much individual support as you need for no extra cost, and we encourage you to email your questions and send us copies of any letters you receive from HMRC and Companies House, but we also thought a blog guide to the basics might be helpful.
In this Part 3, I'll cover Student Loans and VAT ....
Student Loans - If you started studying before 1 September 2012, you have to begin paying off your student loan as soon as you earn over £17,335. As an employee paying PAYE this is deducted from your wages along with tax and NI, but as a contractor, you pay annually through your self-assessment tax return. It's a very simple calculation - 9% of your income over £17,335. So add together your tax efficient combination of salary and dividends shown on your bookkeeping spreadsheet, deduct £17,335 and work out 9%.
Every year we prepare your personal tax return for the year ending 5th April, send you the figures which include your student loan repayment, and then you have until the 31st January of the following year to pay it.
Unfortunately, we don't have access to your loan account which means we can't tell you what your balance is. To find this out, check your annual statements from the Student Loans Company, or contact them direct.
You can make overpayments to your student loan account, but this won't reduce what you pay at the end of the year.
If you think you've overpaid your loan, you can apply for a refund direct from the Student Loans Company.
VAT - Registering voluntarily for the Flat Rate VAT Scheme can be an easy way to boost the coffers, for very little effort. If you're prepared to update your bookkeeping spreadsheet every three months, and make a payment to HMRC 4 times a year, the financial rewards are worth it.
To find out more about how VAT works, including a worked example of the potential gains and a link to upgrade to our VALUE package which includes the VAT service, please click here.
If you have any suggestions for Part 4 of our 'Contractors Made Simple' guide, please contact me at firstname.lastname@example.org