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New Tax Legislation For Freelancers - New tax legislation; what does it mean for freelancers?
New year, New LegislationIt’s a perpetual cycle freelance photographers face and this year it's more pronounced than most, HMRC unfurling a slew of legislative changes that’ll have a varying impact upon the freelance community.
Keeping on top of these changes is vital as they can implications on your cash flow but concurrently they can prove difficult to get your head around, HMRC seemingly not too bigger fans of the Plain English Campaign.
So, in an attempt to clear things up, here’s some of the changes freelancers should be aware of this year... (Avoiding the jargon)
This little nugget of legislation came into effect on 7 January 2013, with the impact confined to higher rate taxpayers.
January – Child Benefit Changes
Those earning over £60,000 have now lost their entitlement to Child Benefit, while those earning over the. £50,000 threshold have seen their Child Benefit payments reduced, losing 1% for every £100 they earn over the threshold.
Those outside of these tax brackets needn’t worry, as they’ll keep their Child Benefit in full.
If you’re a limited company freelancer, Real Time Information is something that you’ll need to get up to get savvy about. Conversely, if you’re a sole trader, then you needn’t worry about it.
April – Introduction Of Real Time Information
Essentially, it’s a new scheme designed to streamline the flow of payroll information between employers and HMRC, the basic thrust of it being to ensure that the payroll information HMRC holds for your company is as up-to-date as possible.
How do they plan to do this? Well, companies will be required to submit records on or before every payday, instead of once a year.
For limited company freelancers this means that every time you draw a salary you must notify HMRC, either through a piece of compliant payroll software or by using HMRC’s Basic PAYE tools.
If you’re a limited company freelancer, chances are you’ll have an accountant, so have a chat with them to ensure that either they’ve got, or can at least point you towards, the appropriate payroll software. You don’t want to be liable for any nasty fines.
As you’ll probably know, come 6 April 2013 we’ll be entering into a new tax year. This year, there are a number of notable rate changes. Amongst the highlights you’ll find:
April, Again – Rate And Threshold Changes
- A 1% drop in the Main Rate of Corporation Tax to 23%
- A rise in the Personal Allowance to £9,440
- A drop in the Higher Rate threshold to £32,010
- A lowering of the Additional Rate from 50% to 45%
If you keep an eye on the news something you might have heard mentioned is Universal Credit, which will impact upon those that receive either Income Support, Working Tax Credits or Child Tax Credits. If this is you, then your payments will change in line with its introduction. The Department of Work and Pensions have outlined its implicationshere.
October – Universal Credit
Of the legislation set to be unfurled, these four are likely to affect the freelance community the most. Ensure that you’ve taken the right precautions to avoid any fines and that you’ve taken the right steps to achieve optimum tax-efficiency. 2013 might then be more profitable than the last!
Article by Mark James, in-house Writer for online accountants, Crunch.