Any tax that you have already paid (so you don’t pay tax twice on the same money)
When and how do contractors pay Self Assessment?
The deadline to pay any tax that you owe after submitting Self Assessment is midnight 31st January. So, if you need to submit a return for the tax year which started on 6 April 2022 and ended on 5 April 2023, the payment deadline is midnight 31st January 2024.
You might need to make ‘Payments on Account’ if your bill is more than £1,000
If your tax bill is more than £1,000, HMRC basically assume that you’ll earn a similar amount again, and ask you to make an advance payment (a payment ‘on account’) towards your next bill. The advance payment is equivalent to half of last year’s bill.
Can I reduce my payments on account?
This is a question we get asked quite a lot! This can happen, and it’s usually because a business has made less profit than the previous year. Where this is the case, you can apply to reduce your payments on account to avoid overpaying tax and then reclaiming it later.
Will I be charged interest or penalties for late payment?
It’s really important to pay your Self Assessment bill before the deadlines. Unfortunately, you will be charged a late fee if you don’t manage to do this. Interest will also be charged until you pay everything that’s still outstanding.
If you think you’ll have any trouble meeting your Self Assessment tax deadlines, the last thing you should do is avoid the issue. Contact HMRC directly or speak to your accountant about what to do – you might be able to make a Time To Pay arrangement.
I’ve made a mistake on my Self Assessment tax return. Can I correct it?
Yes, you can make amendments to your tax return within 12 months of the filing deadline. Just bear in mind that the changes you make could mean you have to pay extra tax or interest. If you submit your tax return with any obvious mistakes or issues, HMRC can correct it within nine months of filing.
No queries can be raised by HMRC about your tax return until it has launched an enquiry first. Try not to panic if this happens though; it doesn’t automatically mean that there’s a mistake or that you’re in any trouble. Often HMRC just want to check your tax calculations are correct – sometimes this can even be at random.
For the contractor this means some extra admin, but for sub-contractors it has more impact. This is because CIS deductions are calculated using the correct CIS tax rate, and without taking into account the tax-free personal allowance.
What about IR35 – How does that affect Self Assessment?
If you are a contractor, or you’re thinking about becoming one, then you’ve probably already come across IR35. It can be a confusing topic, but IR35 basically sets out to close a tax loophole for contractors who operate through their own limited company when really, they’re an employee in all but name.
The client will deduct income tax and National Insurance from your invoice before they pay you – just like they would if you actually were an employee. It’s down to the client to pay this on to HMRC for you.
The payment you receive from the client is ‘after tax’, so you’ve already paid tax on that particular chunk. It’s important to make that clear on your Self Assessment, otherwise you might end up paying tax on it again!
Can contractors claim tax relief through Self Assessment?
In short, yes. Any business can (and should!) include any allowable expenses on its tax return, and claim tax relief on what it spends. Knowing which expenses you can actually claim for is one part of Self Assessment many people struggle with.
It’s often tempting to under-claim just to “be on the safe side”, but in doing this you’re potentially selling yourself really short. In other words, you’ll end up paying more tax than you need to. Again, this is something our team will be pleased to advise you on.
Just to give you an example, a contractor working in the construction industry could claim tax relief on allowable expenses such as:
Materials for work
Essential equipment and tools
General costs of running the business, such as marketing and stationery
Travel costs relating to work
These costs (and many more in fact) can be taken off your overall income which, because you pay tax on profits and not on income, reduces your tax bill. That’s why it’s well worth claiming all the expenses you’re entitled to when you complete your Self Assessment tax return.