A Contractor's New Year’s Resolutions for 2019
With every New Year, most contractors like to reflect on the past twelve months, looking back on their achievements and searching for ways to improve the services they offer. With 2019 ahead of you, you’ll want to focus on improving and growing your business, and we want to help you achieve this goal.
We have many years of experience within the contracting sector, so we’ve come up with a few New Year’s resolutions designed to help you have your best year yet.
Spend More Time on Marketing
Most contractors would prefer to spend their efforts and time on the day-to-day tasks of their business. However, marketing is a crucial step in growing a business, and many contractors end up neglecting it, either because they hate the process of finding new clients or are simply unsure of how to go about it.
In 2019, make it a resolution to invest in marketing as part of your regular routine. Promoting your business may not be as challenging as you believe, and the rewards will be more than worth it. While word-of-mouth is still important nowadays, devoting time to promoting your business via a website or social media is also key.
In order to further develop your brand, you may also want to attend more networking events in 2019, as well as conferences and other industry events that can help you to become more visible.
Make the Most of Your ISA Allowance
Throughout 2019, you have the opportunity to obtain tax-free income and gains with ISAs (Individual Savings Accounts), which makes for a great investment for higher rate taxpayers. For the 2018/2019 period, the maximum you can save in ISAs is £20,000 and the Junior ISA allowance is £4,260. Make the most of your ISA allowance this year; as contractor accountants, we can help you if you’re unsure how to get the most from this allowance.
Develop Your Existing Skillset
Investing in yourself and developing your existing skills should be at the top of your list this year. Start out by working on your current skillset; and if you’re on the Standard Rate VAT, you can even claim VAT on training that updates these skills. You can also find out which skills are in high demand and work on obtaining them; one way of doing this is to check out industry-specific websites or forums to spot a trend or need.
Continuous professional development is especially important in fast-paced industries, such as IT, where you have to keep on top of current technologies and changes. Doing this will help you to remain marketable.
Of course, don’t forget to add your new skills to your CV or LinkedIn, so that any existing and potential clients are able to see what you can do for them. The more you can do, the more you can charge as well, since you’re enhancing qualities that make your business more attractive.
Check Your Dividend Allowance
Many things changed for contractors in April 2018, including the dividend allowance. While before you were entitled to £5,000, the tax-free allowance is now down to £2,000. This means that, if you have used your full personal allowance, you can only draw £2,000 before starting to pay dividend tax. In the 2018/2019 tax year, for dividends of over £2,000 that fall in the basic rate, you will pay 7.5% tax; if the dividend falls in the higher rate bracket, you will have to pay 32.5% tax; for figures above £150,000, the tax rate is 38.1%.
Achieve Better Work-Life Balance
For many contractors, it can be a challenge to get the right balance between life and work, especially if you’re still growing your business. However, while hard work is important for getting new clients and continuing to grow your business, it’s also important to have some downtime, as well. After all, many people choose the contracting life precisely because they can be their own boss and are allowed to take a holiday whenever they want.
On the other end of the spectrum, it can also be very easy to use too much downtime. Enjoying the flexibility offered by contracting means reaching a good balance, so make sure you maximise work, while giving yourself a break, as well.
Ensure You’re Protected
As a contractor and business owner, having a plan in place is crucial. You have financial obligations in your life, be it a mortgage or family dependents, so you’ll want to protect yourself when it comes to claims made against you. You also want to make sure these obligations are addressed in the event of injuries that may prevent you from working.
Professional indemnity will cover compensations that you may have to pay if a client makes a claim against you for negligence. It often also covers any legal fees you may incur. If you damage your client’s property by accident, or even cause injury to someone, having public liability insurance will cover potential legal fees and compensation. Employers’ liability is also required of almost all businesses in the UK; however, this has the advantage of allowing you to hire a substitute to finish your work if you’re not able to.
As the owner of a limited company, you’ll want to seek Directors’ and Officers’ liability as well, which can protect you if your business is accused of financial mismanagement, law breaches or health and safety failures.
Submit Your Tax Return on Time
The end of January will come faster than you think. Make sure you’re ready to submit your self-assessment tax return to HMRC before the midnight deadline on the 31st of January. It is recommended that you file your tax return as soon as possible; you can submit it after the start of the new tax year and after you received your UTR unique code and log-in details from HMRC. Filing late will incur fines.
If you miss the deadline, you will automatically have to pay a £100 fine, whether or not you actually owe tax. If you fail to submit the self-assessment form by the end of April, HMRC will impose an additional £10 daily fine for the next three months, so your penalty will rise to £1,000. You will then incur further fines after six and twelve months if you still haven’t submitted your self-assessment. These penalties may be based on the amount of tax you owe if this is a large figure. Of course, you will also be charged interest for any unpaid tax.
Plan for Retirement
It’s never too late to start preparing for retirement, so look into putting a plan in place in 2019, if you haven’t yet. While you may feel bogged down in work, it’s still important to look ahead, not only to your next contract but also to the distant future. Retirement may feel like a low priority now, but with the average lifespan increasing, it’s also likely that you may end up having a lengthy retirement.
If you don’t have a strategy, it will be impossible to know whether you’ll be able to retire at the age you want and enjoy your desired lifestyle. Speak to a professional who can help you to plan your pension, including any tax implications, so you can just relax and focus on your business.
Be Aware of the 2019 Loan Charge
Disguised employees continue to be targeted by HMRC. With the new 2019 Loan Charge set to come into effect in April of 2019, contractors who have opted into disguised schemes in the last twenty years may face big penalties. This tax charge is already controversial, given that it will give license to punish contractors retroactively, dating back to 1999 if they’re still outstanding on 5 April 2019.
Disguised remuneration schemes are tax avoidance arrangements that, according to the government, cost the Exchequer hundreds of millions of pounds a year. By being paid in the form of loans instead of ordinary remuneration, and thereby avoiding income tax and National Insurance contributions, these contractors have been able to earn twice as much as the average UK taxpayer.
This new policy, which is set to raise £3.2 billion for the Exchequer, started because of IR35, since many limited company contractors joined disguised remuneration schemes to avoid breaking IR35 rules. It will affect those who are using these schemes and haven’t repaid their loans or signed a contract for settlement with the HMRC by 5 April 2019.
Up to 50,000 people are believed to be affected by the Loan Charge, with 65% of them working in the business services sector, such as IT consultants.
The loan schemes many contractors chose to enter are considered dubious by the Loan Charge but aren’t illegal; many involved provided the full and accurate picture of their tax details when they joined, which is why this use of the schemes is considered tax avoidance, not evasion.
Work Only with the Right Clients
There can be a tendency to accept any kind of contractor work, especially if you’re still establishing your business. However, it’s also important to choose only the best clients for you. There’s no use in working with an individual or company if you feel aggravated or stressed – by becoming a contractor, you have gained the right to pick who you want to work with and for, so make it a New Year’s resolution to choose the customers who best suit your business model.
Increase Your Rates
The start of a new year is also the perfect moment to take stock of the amount of money earned during the past twelve months. Did you reach the figure you set out to earn? With the cost of living rising all the time, your wages should reflect that; increasing your rates is the obvious answer to see a rise in earnings.
Many contractors are hesitant to do this, because they fear a loss of clients after a price increase. However, this is not often the case; you will be surprised by how many customers will stay on even with a price change. Should you have a client who only chooses your services if they’re cheap, then you probably won’t want to work with that customer in the long-term anyway.
While it can be daunting at first to change your service rates, the truth is that if you’re good at what you do, you should be compensated accordingly.
Make sure you organise your finances in 2019, too. Many contractors keep records in different locations or simply don’t have a system in place to keep everything in order, which makes it easy to misplace documents. This is a big obstacle when the time comes to send invoices or do taxes.
FreeAgent, our cloud-based accountancy software, can help you to stay organised by storing all of your records in the same place. From bank transactions to receipts, and providing a real-time overview of your accounts, you will never lose anything again with this bookkeeping software. FreeAgent can be used on your computer or as a mobile app, offering the flexibility you need as a contractor.
The world of finance can be confusing without the right advice or support. At Gorilla Accounting, we can help you to keep your New Year’s resolutions by offering great accounting solutions for contractors. Discover more about our services and what you get when you choose us by browsing our website. Contact us to discuss your requirements, and we’ll be on hand to help you grow your business in 2019.