Essential preparation tips for contractors

Essential preparation tips for contractors

As January’s self-assessment tax deadline approaches, self-employed contractors and business owners in the UK construction industry face the critical task of preparing for their tax self-assessment. Often, busy schedules lead to last-minute preparations, resulting in a lack of clarity about tax obligations and what is owed. The 31 January 2024 is the most important deadline for self-assessment tax returns. If you are filing your tax return online for the year 2022-2023, it must be submitted to HMRC by midnight on that date.

Tax obligations can be complex, especially for those in the construction industry. It is essential to understand your income tax, but also National Insurance contributions, VAT (if applicable) and any deductions under the Construction Industry Scheme (CIS). The CIS affects most contractors and subcontractors in construction, involving deductions from payments made to subcontractors, which counts toward their tax and National Insurance.

“Many tradespeople underestimate their tax liability or miss out on allowable expenses,” says Kevin Thomas of Indigo Group. “You need to ensure you’re not overpaying or underpaying by understanding the nuances of your tax obligations. Starting early can significantly reduce stress and provide ample time to address any discrepancies. It also helps in efficient cash flow management, ensuring you have the funds ready for your tax bill.”

Self-assessment preparation 

Gather financial records: Ensure all your invoices, receipts, bank statements and records of expenses are organised and up-to-date.

Understand CIS deductions: If one is a contractor or subcontractor under CIS, then understand how this impacts your tax return.

Deduct allowable expenses: Identify which expenses are allowable for tax purposes to reduce your taxable profit.

Calculate preliminary figures: Estimate your income, expenses and tax liability to avoid surprises.

Seek professional advice: If in doubt, consult with an accountant or tax professional who can provide tailored advice, especially in complex areas like CIS compliance.  

“Contractors will find it an extremely busy time as subcontractors approach them for their earnings statements,” continues Kevin. “This is where Indigo Group can help those with a subcontracting workforce; every subcontractor’s statement of earnings is held and uploaded to the individual subcontractor’s safe and secure Indigo portal. This means they can obtain this information directly from us ready to complete their tax returns – saving time and hassle for everyone.” 

 

You May Also Like

Trade & Calibration day a huge success for AMP Electrical – Leicester

Trade & Calibration day a huge success for AMP Electrical - Leicester AMP Electrical's ...

Managing the Issue of Digital Age Business Continuity

Business Continuity Made Easy Any interruption to business continuity represents high risk. In this ...

NAPIT calls for Enhanced Electrical Safety Standards throughout the UK

Electricity is in use all around us, it can be dangerous and has the ...