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Avoid Financial Reporting Issues With Our Year-End-Tax-Planning for Contractors

You must engage in careful tax planning to fulfil your financial goals and make the most of your tax credits. For instance, a contractor like yourself can reduce the corporate tax burden by adopting various tax planning strategies.

The tax burden can be heavy. Therefore it’s important to minimise it to the greatest extent possible. Investing effort into tax planning can be rewarding if you are subject to a higher income tax rate or anticipate owing a significant amount of taxes in the future.

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Since most contractors run their businesses as a Limited Company, they have greater leeway to take advantage of tax planning strategies than full-time employees.

Fortunately, tax planning for contractors doesn’t have to be complicated. Our accountants at Pearl Lemon Accountants can help you prepare for the future and reach your financial goals.

Want to know more? Call us now.

Year-End-Tax-Planning for Contractors In A Nutshell

Contractors should start thinking about the major tax implications that could affect their business as the end of the year approaches. With careful tax planning, a company can defer or even decrease some or all of its taxable income for the current year.

A company’s tax liability can be minimised through some tax planning approaches. A firm can reduce its tax obligation by using specific tax planning strategies. A good time to evaluate the company’s financial plans, tactics, and outcomes is as the year comes to a close.

It’s also the point when you want to consult with a tax accountant specialising in your business so you can discuss how you can avail of a tax allowance.

Depending on the circumstances, a contractor may be able to reduce or even eliminate their tax liability by accelerating some expenses while delaying others. 

Planning all spending, including bonus payments and income reporting, around this time of year is crucial. That’s why it would be wise to put off certain spending and put off some earnings until the new year.

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Tax Relief and Tax Savings for Contractors

Contractors should include year-end tax planning into their overall business strategy to avoid missing out on potential tax savings. 

The following is a range of common tax planning tips that contractors who have incurred a greater tax liability in prior fiscal years may use to lower the tax rate and maximise net income.

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Pensions

If a contractor doesn’t contribute enough to their pension each year, they can make up the difference by making extra payments that can be used to avail corporate tax relief.

Suppose you are a new contractor who is a higher-rate taxpayer and have one or more individual pension schemes. In that case, you should review your tax situation since you may be eligible to receive tax relief and refunds because of your pension payments.

Contributions to Charity

Contractors can reduce their personal tax liabilities from the prior year by making charitable contributions as part of their overall tax planning strategy. Under HMRC’s regulations, contributors can choose the accounting period in which their contributions are deductible.

In fact, higher-rate taxpayers can claim a 40% tax reduction on charitable contributions.

The independent contractor may elect to include the declaration of current-year contributions on their individual self-assessment tax return from the prior tax year. 

This allows the independent contractor to reduce their taxable income for the current tax year by the amount of money they donate to charity. To enjoy the tax reduction, the contractor must make a claim on the tax return for the year when the contractor wants to claim the relief.

Donating to charity is a versatile year-end tax planning technique since you can make a large donation at the end of the year and claim a tax deduction.

This enables the taxpayer to donate a sizeable sum to charity, with the money being distributed over the following few years to one of their choices.

Employment Expenses

Most independent contractors who operate under a limited corporation will regularly submit receipts to their company for reimbursement of approved work-related expenses. 

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All employees, however, including those who work under umbrella companies, those who are paid through an agency’s payroll, and those who might have temporarily left the contractual sector to take on a fixed-term role, are subject to the regulations governing employee spending.


You can get a rebate on your taxes from the previous year by claiming your expenses on your tax return, though HMRC may handle the claim outside the tax return system. It can add up to a significant annual sum for contractors and temporary workers who do not have their own limited company.

Employ family members as shareholding directors

Appointing spouses or civil partners as directors of a limited contractor company is another way to save money. This allows both people to make the most of their annual income and tax exemptions.

If a couple who are married were to receive a total compensation of £90,000, it would be more tax efficient for them to split the payment in half. This is because one director shareholder taking the full amount would be subject to higher tax rates.

Main Challenge in Contractor Tax Planning

The taxation system in the United Kingdom is extensive and complex. It’s crucial to be aware of the most recent tax changes to prepare for the coming fiscal year.

If taxes aren’t your thing, it’s probably best to see an expert. 

If you’re looking for dependable service, look no farther than Pearl Lemon Accountants. They will be able to direct you away from common mistakes, towards prospective opportunities, and towards the greatest possible cost reductions. Talk with us

Our Tax Planning Services

When you need comprehensive financial reporting and accounting services, go no farther than Pearl Lemon Accountants’ team of seasoned professionals. We offer the following outsourced services. 

HMRC Tax Investigations Advice

Audits and investigations of your taxes can be a hassle, but Pearl Lemon Accountants is here to help. Our tax professionals are updated with the relevant tax laws, compliance concerns, and HMRC procedures, as well as the strategy required to handle HMRC investigations.

VAT Accounting Services

Business owners often find value-added tax (VAT) to be one of the most challenging and time-consuming areas of accounting. Regarding VAT, Pearl Lemon Accountants is a cut above the rest. If you’re feeling overwhelmed by the complexity of VAT, consider hiring one of our expert accountants.

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Personal Tax Services

We assist in fulfilling individual and business tax responsibilities. The primary goal of our tax compliance services is to help our clients pay their taxes on time and follow HRMC’s requirements.

Corporate Tax Services

We help businesses of all sizes with corporate tax compliance needs, including preparing tax returns, meeting HMRC’s electronic return filing requirements, and making the most of tax credits and deductions.

Payroll Services

Payroll rules and regulations are fluid. Therefore your company needs access to skilled, all-encompassing back office payroll support to ensure that payroll is always compliant with the current laws and regulations.

Your tax responsibilities will become more complex as your business expands. Pearl Lemon Accountants is a solid choice for accounting, tax, and audit. 

Pearl Lemon Accountants has the solution for all your tax processing needs. If you need more of them, you can check out our other offers HERE.

Don’t Worry Every Year End From Now On

When you hand over your year-end-tax-planning with us, you can guarantee that your fiscal reports for the year will be clean, free of error, and appropriate for public viewing.

Here at Pearl Lemon Accountants, we value time and success. That’s why you should let us help you focus on other things other than handling your complicated taxes.

FAQs

We refer to employee costs as salary, bonus, commission, health insurance, workers’ compensation, overtime pay, and pension contributions.

As the name implies, an umbrella company employs temporary staff (also known as agency workers or contractors) on behalf of some other employment business. Workers will be assigned to clients of the agency.

In a fixed-term employment arrangement, the employee commits to working for the company until a specific date or until a particular project is completed.

Get a hold of the best tax planning experts from us.

Book a call today to get started.