‘Nothing is certain in life except for death and taxes’ – Benjamin Franklin – 1789
Sorry to start on that rather sour note, but it’s a phrase that holds true, even more so if you’re a freelancer. As a member of the self-employed you’re liable for a litany of tax laws and it often pays to know your tax facts, quite literally.
Getting your self-assessment finished and filed is probably paramount in your concerns, and whilst that might have been and gone, there’s still a lot to be wary of, especially given HMRC’s tendency to update their rules from time to time.
2013 is particularly tumultuous in this regard, with the taxman bringing in a slew of legislation that’ll affect the self-employed in a range of ways.
It’s a lot to get your head around, but thankfully you’ve got finance bods like CRUNCH who can clear things up a little. So, without further ado, here’s some of the tax developments freelancers should keep their eyes on this year…
You may have felt this already, as it came into force on January 7th.
Essentially, it affects those in the higher echelons of earning, those with a salary of £60,000+ losing their entitlement to Child Benefit and those earning over the £50,000 threshold seeing their Child Benefit payments reduced. So, if you’re amongst the freelancers in these pay brackets, bear in mind the implication this could have on your finances.
If you’re amongst the limited company freelancers out there, then Real Time Information is something that you’ll need to get up to speed with. Conversely, if you’re a sole trader, then you needn’t worry.
At its crux, R.T.I is a new scheme designed to streamline the flow of payroll information between employers and HMRC, the basic thrust of the scheme being to ensure that the payroll information HMRC holds for your company is as up-to-date as possible.
This will be achieved by getting companies to submit records on or before every payday instead of once a year. So for limited company freelancers this means that every time you draw a salary you must notify HMRC, either through a piece of compliant payroll software or by using HMRC’s Basic PAYE tools.
If you’re a limited company freelancer, chances are you’ll have an accountant, so have a chat with them to ensure that either they’ve got – or can at least point you towards – the appropriate payroll software. That way you’ll avoid any nasty fines.
The 6th April ushers in a new tax year and this year, there’s a number of rate changes. Amongst the highlights you’ll find…
- a 1% drop in the Main Rate of Corporation Tax to 23%
- a rise in the Personal Allowance to £9,440
- a drop in the Higher Rate threshold to £32,010
- and a lowering of the Additional Rate from 50% to 45%
These will have varying implications depending on your financial position, so examine that and then try to determine how the above might impact upon you.
Elsewhere, something that’s worth bearing in mind if you receive Income Support, Working Tax Credits or Child Tax Credits is that your payments will be changing with the introduction of the Universal Credit. The usual parliamentary to-ing and fro-ing makes it hard to decipher whether its introduction is a good or a bad thing, but you can get a basic overview of just what this new piece of legislation means here.
Of 2013’s incoming legislation, these four are likely to affect the freelance community the most. Make sure you’ve taken the right precautions to avoid any fines and that you take the right steps to achieve optimum tax-efficiency. 2013 might then be a tad more profitable than the last!
Mark James is an in-house writer for online accountants Crunch. Thank you for letting us share this blog post, which is a re-blog of the original.
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