Tax Guide For Self-Employed Builders

Many people who work in the construction industry are self-employed. That’s not surprising, because the advantages are obvious. If you’re self-employed, you can set your own schedule, choose your own clients, and accept jobs at home and abroad, depending on how much you want to travel. For many construction professionals, it’s a no-brainer.

However, self-employment comes with responsibilities. You are completely in charge of your own tax and national insurance, and this means that it’s up to you to make sure your relationship with HMRC is a good one. In this post, we’ll look at the most important things you need to know as a self-employed builder.

Duties and deadlines

When you’re self-employed, you need to deal directly with HMRC. It’s extremely important to make sure that you declare all your income in the right way and by the correct deadline. Otherwise, you might find yourself on the receiving end of fines and penalties – even serious ones. The first step is to know all the key dates of the tax year, which runs from 6 April until the following 5 April.

When you start to work for yourself, you will need to register for self-assessment if you are not already registered, as well as for Class 2 National Insurance. You have some time to do this, since you won’t have to submit a tax return until your second year of business. However, you must have registered by 5 October in that second year.

By the following 31 January, you must submit your tax return for the first year of business and pay any money you owe HMRC. On 31 July, you’ll make a payment on account for the current tax year. This amount will be calculated based on your previous year’s income. If you end up paying too much, you’ll receive a refund from HMRC – if you’ve paid too little, you’ll make up the difference with your next tax return. This will be the standard routine in future years: two annual payments on account, plus either an additional payment or a refund.

Self-employed builders can also sign up to the Construction Industry Scheme. This makes life easier by allowing your clients to deduct tax from your payments and pass it along to HMRC. If too much is deducted, you’ll receive a refund.

What counts as taxable income?

You must declare all the income you have received over the whole tax year. It’s surprisingly easy for HMRC to figure out that someone’s lifestyle and reported income don’t match, and they take tax evasion very seriously. 

However, while you declare all your income, you should also make sure to declare your expenses. HMRC needs to know how much of your income is profit, and how much of it goes out on necessary costs for running your business. Tax-deductible expenses might include work equipment and protective clothing, fuel and insurance for your work vehicle, and even the cost of hiring an accountant to advise you on declaring your expenses.

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