A specialist contractor accountant based in Mansfield is claiming that contract workers with their own limited or umbrella company are missing out on the most tax-efficient method for extracting remuneration from their business.
The firm base the announcement on its latest assessment of the building, IT and medical industries where the firm says that many contractors still prefer to pay the full rate of tax using corporation tax or self-assessment rather than look into alternative business structures and tax planning strategies that are perfectly legal.
By working with the UK’s leading tax technicians, specialists and QCs, the firm, which is a chartered accountant, claims that there are unique and robust tax planning solutions that can be tailored to each individual’s needs and personal circumstances.
In many cases net pay can be increased to between 86 to 90 per cent of gross earning, thus reducing tax liabilities to between 10 and 22 per cent.
McGregors corporate director Philip Cudworth said: “There is no definitive right answer as to why this is the case as each contractor’s tax position is unique, but there are still a great many self-employed people, contractors and high earners who could significantly reduce their tax liabilities if only they sought advice and considered the alternatives.”
He added: “As a limited company structure, normally the objective is to strike a balance between paying sufficient salary to qualify for state pension and other benefits and generating the most tax efficient income for the contractor.
“Up until 5 April 2014 most contractors’ optimum salary was £640 per month (£7680 per year). This is a sufficient salary to provide contractors with access to the state pension and other benefits without incurring an NIC charge.”
The alternative to the traditional limited company, umbrella company or self-employed route is a unique tax contractor solution in which contractors can protect and manage their financial affairs in a tax efficient manner whilst using UK legislation enacted by parliament.
The deadline by which tax returns must be submitted to HMRC has passed, so it is an ideal time for contractors to review the best way to operate in the next financial year.