Generally, if your client is a business customer, the place of supply will be where the client is based but if they are a non-business customer, the place of supply will be where you are based.
For most contractors, this means that your place of supply is generally where your customer is based.
If your place of supply is in another EU country, you do not need to charge UK VAT - providing they are a registered business in their country. You will need to request their VAT registration number and display this on your invoices. It will also need to be reported to HMRC within your VAT return and a separate EC sales list.
If your place of supply is in a country other than the EU then you do not need to charge VAT as it is outside the scope of VAT entirely. No further actions are needed for this other than not including VAT on your invoices.
If you are looking to check if you need to charge VAT or need assistance with any other VAT matters, contact one of our VAT experts today.
When it comes to setting aside money to pay your tax bill, the general rule of thumb percentage for self-employed individuals is 25% - 30%.
This figure will vary depending on the amount of profit you report. If your profit falls between £50,000 - £100,000, it is recommended that you set aside 40% for tax. And if your profit exceed £100,000, you should be setting aside 45% for tax.
Bear in mind that these are general recommendations, and may not be an accurate estimation depending on your circumstances. HMRC's ready reckoner tool can help you work out an approximate figure you need to set away each month. We recommend consulting our Forma accountants if you need further tax advice.
You should charge VAT when your business becomes VAT registered-whether the registration is mandatory or voluntary.
VAT registration is mandatory when:
If you're thinking about registering for VAT voluntarily, these are the main benefits and downsides you should consider:
To set up a limited company, you need to take the following steps:
You can change the name of your limited company through a third party (such as a company formation service), or directly with Companies House.
If you're opting for the latter, you need to complete form NM01. There is a £10 fee payable to Companies House to file the form.
If you're trading as a limited liability partnership, you need to file form LL NM01. A £10 fee applies.
While taxes and other administrative work may be relatively easy when you are a Sole Trader, as your volume of business goes up, there are more and more reasons to take on the task of becoming a Limited Company.
Luckily, running a Limited Company doesn't have to be exceedingly complex, though following a set plan will help to keep the complexity to a minimum.
You can reclaim all the VAT on fuel if you use your vehicle exclusively for business.
If your vehicle is driven for both business and personal use, you may handle VAT in the following ways:
You've delivered your work, and it's time to receive your payment.
Before that, you'll need to make an invoice. It's an important document: not only does it help you obtain money you're owed, it also serves as evidence of a transaction in the event that you need to seek legal action to handle non-paying clients.
If this is new to you, you might be wondering: How do I create an invoice, and what must I include? Are there best practices or tips I need to know?
We'll answer all of these questions below:
With our calculator, you can work out your VAT in just a few quick clicks.
VAT, or Value Added Tax is a consumption tax that is applied to most goods and services. While the standard rate (20%) applies in most cases, there are items-such as children's car seats and sanitary products-that are charged at the reduced rate of 5%. Using the slider on our calculator, you'll be able to calculate the VAT and gross or net prices for different VAT rates. If you're unsure about the correct rate you should apply, refer to HMRC's resource on VAT rates.
Payments for your Self Assessment tax bill are due on:
"According to HMRC, you can claim trading allowance if you have trading income from:
You can claim the property allowance if you have income from land or property.
You won't be able to claim the allowances if you have trade or property income from:
- A business that you or an individual connected to you owns or controls
- A partnership where you or individuals connected to you are partners
- Your employer, or your spouse's or civil partner's employer
You can't claim the property allowance if claim:
- Claim the tax reducer for finance costs such as mortgage interest for a residential property
- Deduct expenses from income from letting a room in your own home, instead of using the Rent a Room Scheme"
To get tax-free childcare, you need to:
In the UK, the majority of self-employed people operate as sole traders. While there are many advantages to being a sole trader, you could take home more money and give your business a professional edge by setting up as a limited company.
In this article, we'll look at the advantages of operating as a private limited company to see how it could benefit you. If you're interested in seeing whether a limited company could be a good option for your business, check out our Business Structure guide. If you're already operating as a sole trader, making the jump to a limited company is more straight forward than you think.
Who can turn their nose up at the prospect of increased take-home pay? Well, that's the principle benefit of setting up a limited company and one of the main factors that drive people to switch from a sole trader.
As a director of a limited company, the way you pay tax is different from how you pay as a sole trader. As a sole trader, you'll pay 20% or more on everything you earn over the tax threshold. As a limited company, you typically pay yourself a small salary so you incur as little personal tax as possible. The majority of your income will come in the form of dividends that are taxed at a much smaller rate, meaning you're able to maximise your take-home pay.
As well as the tax benefits, paying the majority of your income through dividends means that you're able to pay less National Insurance Contributions (NICs) as these do not apply to dividend payments.
Example - Here's a quick comparison of the difference in take-home pay for a sole trader and a limited company.
As you can see, you save £965.64 as a limited company. What's not to like?