At Bright Ideas Accountancy, we know how satisfying the contractor lifestyle can be. You pluck jobs from an array of clients, seeing to them one at a time, shaking off any complacency that’d otherwise fester in steady employment. But you shouldn’t assume your finances are doing as well as your high spirits… Without realising it, hundreds or thousands of pounds could be pouring from holes in your money management.
That’s why we’re here, though: to bring you back around to peak contracting wealth! Over the years, we’ve come across typical mistakes regarding this issue, so let’s explore them, and why they’re avoidable.
Not assigning budgets to a project
We’re betting that contract sites aren’t on your doorstep, and won’t have an array of necessary tools ready when you clock in. The self-employed have to budget for travel, uniforms, special equipment, and any overnight accommodation costs if there’s an extensive bit of work to finish.
Set a budget for ancillary charges before a project kicks off. That way, you’ll be sure not to overspend.
Forgetting to keep expense receipts
Tax can be a serious burden to your take-home pay, especially if you’ve surpassed the £45,000 per anum mark. Hence, contractors must aim to receive leniency wherever they can, such as those associated with vital expenses you accrue.
Yet unless there’s sufficient evidence – i.e. a list of paper or digital documents stretching across the tax year, aligned with your bank statements – HMRC won’t grant it. Stay pro-active with receipts collection, because tax-free benefits only get more substantial as you earn more.
Getting stuck on IR35 stipulations
To be a valid contractor, in the eyes of the government at least, you have to skirt IR35 rules for self-employment. This is motivated by the agreement you set up with client. Issues surrounding your independence must be clear, such as bowing to your control over how a project is realised, the extent of repairs you’ll do if required, and fluid work schedules.
Get them, or overlook IR35 completely, and you’ll be classed as a temporary employee, and taxed as such. That’s a risk no-one should take; you’ve already made it as an attractive prospect, so why sink the rewards that follow?
Sparse catch-ups with an accountant
Obviously we’re biased here, since Bright Ideas Accountancy is a thorough, friendly service that likes to be ‘in the loop’ with what our contractors are doing. But it really is important – financial safeguards can morph from job to job, leaving you tangled in small-print and financial jargon.
It’s far better to have regular check-ups with your accountant. Our services are designed around valuable, one-on-one time with our customers. We never leave you on the back-burner; on the contrary, with consistent attention, we’ll boost the value we provide over the years. It helps, too, that we can see your real-time account status with FreeAgent software, supposing you link a profile to our system.
Breathing easier now? Ideally, none of these blunders will affect you… But if they do, call Bright Ideas on 0161 451 3940 or message info@biaccountancy.com to exorcise them from your contracting career.
