Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

FINANCE

By Richard Hepburn from Gorilla Accounting, expert contractor accountants who specialise in using a technology-led approach to accountancy.

With 2021 now in full swing if you’re self-employed, there are a few things to keep in mind, as the new year, brings several obstacles you’ll need to navigate.

Richard Hepburn, Operations Manager at Gorilla Accounting, takes a closer look at some of the major events that will affect the self-employed in 2021 and offers some insight into how contractors and freelancers can better prepare for the new year and the challenges it might bring.

Brexit

The transition period ended on 31 December 2020, and although businesses had been urged to prepare for Brexit, it’s still quite unclear what this means for freelancers and contractors. Despite the closed deadline, it’s still not entirely known what will happen to trade between the EU and the UK.

What’s clear is that some things have changed, be it regarding goods and services or the movement of people:

  • UK businesses are no longer required to complete an EC Sales List when supplying services to businesses located in the EU.
  • All supplies of digital services to consumers in EU member states are liable for VAT in the consumer’s member state.
  • If you receive personal data from people in the EEA and EU, you may have to ensure that you can continue to use it in 2021.
  • You must also ensure that your qualifications are still valid in the EU and recognised by firms and organisations there if you plan on working with EU countries.

IR35

April 2021 will come with changes to the current IR35 legislation. IR35 is also called intermediaries legislation – according to the government, an intermediary is usually a limited company that “will normally be a worker’s personal service company but could also be a partnership, a managed service company, or another person. A worker is sometimes known as a contractor.”

While IR35 was first introduced in 2000, it’s been criticised by business owners and tax experts since then. This is because the legislation is difficult to understand, considered to be badly implemented by HMRC and has caused issues for many contractors across the nation (some of them pretty high profile).

It’s important that you understand off-payroll working rules and what’s going to change in the new tax year. Currently, in the public sector, the client decides your employment status, but you decide your own status if you work in the private sector.

After 6 April 2021, any private sector clients, classed as medium or large entities will decide your employment status and, if you’re within IR35, you’ll have to pay the adequate tax and National Insurance contributions.

However, contractors and freelancers are likely to be in demand due to the shift caused by the pandemic. Companies may prefer to hire someone they don’t need to train and who’s ready to start work immediately; they may also want to hire contractors and freelancers for a specific project instead of taking on a new employee and paying a salary.

Coronavirus

Support for the self-employed has been crucial since the start of the pandemic and is set to continue throughout 2021. This is good news for contractors and freelancers who worry about their business and financial situation once the new year hits.

So, what do you need to know about this?

Furlough Scheme

The furlough scheme will be extended until the end of April 2021. The government will continue to pay up to 80% of an employee’s usual salary, up to £2,500. Those who have been made redundant after 23 September can be hired and put back on furlough.

Richard Hepburn, Gorilla Accounting’s Operations Manager, said: “With 80% of income continued to be covered by the government, there is some breathing space for employees and businesses […]. It was hugely important to people across the country that the government provided an adequate level of support and, through this extension, they have gone some way to achieving that.”

Job Support Scheme

Because the furlough scheme was extended due to the recent second lockdown, the Job Support Scheme has been postponed. This scheme was set to start on 1 November 2020 and meant that the government would pay up to 67% of the wages of employees. This is useful for businesses like pubs and restaurants which have been impacted heavily each time they have been forced to close.

Richard Hepburn

Richard Hepburn

The government has since withdrawn the Job Support Scheme.

Business Rates Relief

You may be eligible for business rates relief because of the COVID-19 pandemic. If your business is in retail, hospitality, leisure or even a nursery, you may be able to get this relief, which means you won’t have to pay business rates for the 2020/21 tax year.

Local councils will automatically apply the discount, so you don’t have to sign up for anything.

VAT Payments

If you deferred your VAT payments between 20 March and 30 June 2020 due to being unable to make them, the government allows for some more breathing space.

You can:

  • Pay what you owe in full on or before 31 March 2021 now
  • Opt in to the new VAT deferral payment scheme that will launch in 2021

You’re still unable to opt into the new payment scheme, as this will only be available in early 2021. However, once possible, you will have the opportunity to make up to 11 smaller monthly instalments that are interest-free, and which have to be paid by the end of March 2022.

HMRC says that to be eligible for the new scheme, you must:

  • Have deferred VAT
  • Be up to date with your returns
  • Opt-in before the end of March 2021
  • Pay the first instalment before the end of March 2021
  • Pay the deferred VAT by Direct Debit

Bounce Back Loan

This loan helps small businesses to access finance more easily and quickly during the pandemic. Small and medium-sized businesses can borrow between £2,000 and up to 25% of their turnover, with the maximum loan amount being £50,000.

Businesses now have the option to repay the loan over a period of up to ten years. There are no fees or interest to pay for the first 12 months – after that, the interest rate is 2.5% a year.

Innovation Grant

The government is also helping SMEs focused on research and development by offering access to £750 million in grants and loans.

Corporation Tax

HMRC may wave penalties and fees for late filings if there’s a reasonable excuse. While this is not guaranteed, you may be able to get a respite if you contact the government so, if you’re having problems with submitting your return on time, let them know.

Self-Assessment

As a sole trader, you may also find it difficult to pay your self-assessment bill. If this is your case, you can set up a payment plan to spread the cost over a period of time, allowing you to breathe a little more easily. Not everyone is eligible for this. To benefit from this payment plan, you must:

  • Owe up to £30,000 on your self-assessment tax bill
  • Not have other payment plans or debt with HMRC
  • Have your tax returns in order and up to date

It also needs to be less than 60 days after the payment deadline for you to qualify.

Key Deadlines for 2021

As a contractor or freelancer, you also have many important deadlines and dates to keep in mind. Submitting returns late will incur penalties, so you must stay on top of your self-employed calendar if you don’t want to end up paying more.

A UK tax year runs from 6 April to 5 April of the following year, so we’re currently in the 2020/21 tax year. The following dates may not apply to everyone, but the ones that do will help you to take action without delays.

After 5 April 2021

If you’re required to file a tax return when the tax year ends, you’ll receive notice soon after this date. Another thing to keep in mind is that, if you’ve recently become self-employed, you have to register with HRMC for tax and National Insurance.

31 July 2021

The second payment on account is due on this date. Due to the coronavirus, this second payment (for the tax year of 2019/20) was deferred until 31 January 2021.

5 October 2021

You have until 5 October of next year to register for self-employment with HMRC.

31 October 2021

This is the deadline for paper tax returns and any paperwork sent after this date will incur a penalty.

Continue Reading

Why pay for news and opinions when you can get them for free?

       Subscribe for free now!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Posts