When starting out in business as an independent consultant or contractor, it is essential to get business finance organised properly and a system in place to ensure that all financial matters can be kept up to date with as little stress as possible. When a person decides to work independently, keeping finances organised can be rather difficult, as it can be very time consuming. However, there are several avenues of assistance available, and issues such as IR35 and income tax can all be resolved relatively quickly and easily.
Finding the right Help
In many cases, the services of an accountant are ideal, although this can be an expensive option. However, there are also many advantages. All tax and account-related paperwork can be dealt with by a qualified professional so that the self-employed worker will not need to worry about it. Payments to staff and any contractors will be automatically processed, and all the business owner needs to do is keep the receipts and time-sheets and simply pass them on. It is important to spend some time with the accountant; as a result, some administration may need to be done in house.
Those who are working independently may find that it is much easier to opt for the help of an umbrella company. This is a service that offers “employed” status to independent workers, but still allows them to have complete control over the work that they do. When a freelancer is starting out, it can be difficult to get to grips with the financial side of a business, which is something that an umbrella company will completely take care of so that the contractor does not have to worry.
The limited company option
If the decision is taken to set up a limited company, then the business will need to be formally registered. This can be a very efficient system for those who are thinking long-term. When tax is taken into consideration, the services of a qualified accountant will be essential here. A business bank account will also be necessary, and the company will need to have a director who is responsible for overseeing all functions of the company. Those who are working independently on a short-term basis may find it is too complicated a process to set up a limited company and should instead consider the alternative of using the services of an umbrella company.
How does it work?
The umbrella company is formally the employer, although the worker does not answer to them. Taxes are processed by the umbrella company and paid on a PAYE basis. The same applies to National Insurance. Some expenses can be claimed – the umbrella company will be able to clarify which expenses qualify so that income can be maximised.
In order to use this system, the worker will need to provide tax and NI details and send in time-sheets each week and month. The company will issue invoices to clients and chase any payments that have not been made. This allows the contractor to work on building his or her business, finding new clients and working, rather than dealing with administration and any other tasks that will get in the way of work.
This article was contributed by Dave at the Publisher Network.