One of the great perks of working for yourself as a self-employed professional is your ability to control your income and your working hours.
However, another great perk that can often be overlooked is your ability to control and ultimately reduce your tax liability, LEGITIMATELY!
As your accounting partner Icon Accounting ensure that you are always maximising your income and reducing your tax liability with our proactive approach. By providing bespoke, accurate and up to date advice, we help you make decisions on things like pensions, savings, switching from an umbrella solution to a limited company set up. In short, giving you all the options available to you to earn in a higher income and lower your annual tax payment.
In this article we will focus on several ways to maximise your income in the short term and in the long term as a self-employed limited company contractor.
Important to note: At Icon Accounting, we will always ensure you are fully compliant and paying the correct tax owed, but we will also ensure you are fully aware of the best ways to reduce your tax liabilities along the way– sounds tricky doesn’t it – that’s what we are here for to simplify every option for you!
Business Expenses- Are you claiming what you are entitled to?
Ensuring you are claiming all allowable expenses that you are entitled to is a sure way to reduce your annual tax bill.
From big outgoing business expenses like laptops, software & mileage to smaller spends like phone bills, WIFI and A4 pads are you sure you are claiming everything you could be through your business?
The golden rule here to remember is that the expense you are claiming must be solely used for business purposes, if it’s not it is likely that the expense isn’t allowable (with a few exceptions).
For example, while working at home you can claim a fair portion of WIFI, light & heat etc. – but don’t worry we do the maths for you on this one!
A big one that will dramatically reduce that end of year tax bill are your pension contributions. As an Icon Accounting client, you will have complimentary access to finance & wealth planning specialists Rockwell Financial to help you find the right balance with your personal savings options.
As well as ensuring your future financial security investing in a pension fund is a great way to save €1000’s on your annual tax bill.
Maximise Your Salary
As a limited business owner, you will have the opportunity to pay yourself a salary of your choice and therefore decide the tax threshold you will reach.
For example, in Ireland the first rate of tax is 20% (using a single person assessment) for all income up to €35,300, anything earned over this amount is then taxed at 40%.
Therefore, if you are earning more than €35,300 per annum you can choose to take a salary that will keep you at the lower rate of tax while investing additional business profits at your end of year into a pension fund for example- reducing your annual tax payment while growing your personal pension pot.
Profits that remain in your company at the end of your business year will be liable to corporation tax of (12.5% + 6.5%) so ensure you are withdrawing a suitable salary for you before you pay this on all business profits left in your company!
Our team will be happy to work with you to find out what salary option works best for you and your company plans as well as advise you to ensure you are maximising your take home pay and optimum tax rates based on your annual income.
Trainings & Education
You can also claim tax relief on training courses which are required for a specific contract. All training courses must be carried out within the timeframe of the contract and demonstrated as a direct requirement for the contract. Should you wish to undertake a training course and can show that it is relevant for your contract you will be able to claim tax relief at up to 52% through your limited company. Receipts must be made out in name of the Limited Company & Completion of the pre-approval form. If you are unsure if the course you wish to undertake is allowable, we will be happy to advise!
One tax saving many people aren’t aware of – or forget to avail of is that each year you can also claim a €500 tax free gift voucher through your limited company through platforms like Me2You.
Talk to your account manager today to find out how to claim this and get planning on how you will spend it!
Under the Entrepreneur Relief scheme it is possible to save up to 23% on your tax liability on your Limited company profits.
For quick demonstration purposes that means with a retained business profit of €35,400 in your business over 5 years (total €177k profits) you could save more than €43,000 through availing of this scheme.
There are terms and conditions for this one but with that saving opportunity this is one to talk to your account manager about or you can read more about it here.
Get Professional Help
Working as a self-employed contractor shouldn’t be hard and you certainly don’t need to be a tax expert to make it work and feel confident you are getting the most from your income without having to sit ACCA exams!
The trick is to outsource the tricky time-consuming accounting work to professionals, who in the long term will likely save you thousands of euros, never mind the headaches and paperwork they will save you along the way through having an always available expert to advise you every step of the way!
At Icon Accounting, we help thousands of contractors every year to ensure that they are maximising the benefits that contracting can provide.
If you are an Independent Professional seeking more proactive advice and support, you can contact us directly on firstname.lastname@example.org or by calling 01-8077106 where our team of experts will be delighted to assist you.