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In Part 1 of my guide to the basics, I covered Bookkeeping Spreadsheets, Annual Company Accounts and Corporation Tax. This time I have 3 more subjects that often crop up in emails from clients, especially new contractors who are still adjusting to a new way of working ....
Self Assessment - not all of our contractors have to do a self-assessment tax return, but if you have income other than through your limited company, or you draw more than £30,300 in dividends, or you have a student loan for example, you need to do a self-assessment tax return, and we'll do that for you at no extra cost. The self-assessment tax year runs from the 6th April to the 5th April for everyone, regardless of your company's year-end. Everyone has to file their personal tax returns by the 31st January, and this is also the deadline for payment. So for the personal tax year ending 5/4/15, your tax return has to be submitted and paid by the 31/1/16.
Annual Return - around the anniversary of the date your company was registered with Companies House (your incorporation date), you are required to complete an Annual Return. This is not a financial document and has nothing to do with your bookkeeping spreadsheet, profit, expenses or dividends, etc. It is a document relating to information such as directors details, names and addresses and the type of company. We'll file this on your behalf, so make sure you keep us up to date with any changes in your details. There is no tax to pay in relation to your annual return.
Salary & Dividends - to make you as tax efficient as possible, you take money out of your company in a combination of salary and dividends. The salary is set at a rate which uses your tax-free allowance but doesn't incur employers national insurance. It does, however, cover your own class 1 national insurance contributions so you don't have to make any further payments in the way that self-employed people do. The rest of your income comes in the form of dividends, which is simply a payment from company profits, to you as the shareholder. Your bookkeeping spreadsheet calculates 4 dividends each year as a guide, but we confirm the final dividends as part of the year-end process when we prepare your final accounts.
In Part 3 of the 'Contracting Made Simple' guide, I'll look at VAT and student loans.
Hopefully, you're beginning to understand your new world of contracting, but as a CEJ client you can email me anytime with your questions: email@example.com. As part of our commitment to you, we offer as much help and support as you need, so please email us a copy of any correspondence from Companies House or HMRC and keep in touch!