Holding On To A Greater Proportion Of The Money You Work For Ways To Lessen The Tax You Pay By Becoming Your Own Boss
Over A Century Ago, it came on a snowy January day. By the 1970s, we celebrated it in the warmer climes of June 4th. Over the past 40 years it has moved backwards and forwards from late May to early June and back. Regrettably it seems unlikely to return to a colder date in the calendar. This year we might have had a garden party to celebrate it on the last but one day of May.
Tax Freedom Day is the day I’m talking about. If all the tax payable by us in the year from January to December, we had to pay up front, then this would be the day on which we could stop paying it and begin benefitting ourselves from the money we earn.
What a gloomy fact that we spend so long working simply to pay the tax collectors. But there exist ways in which tax can be legally avoided and tax liability can be minimized. This is especially so if you work for yourself, if you work from home or in the various online jobs that have come into being in the past two decades in Internet business.
For employees have little choice but to live with the fact that money is deducted, up front, out of the money they earn. The self-employed take responsibility for their own tax affairs. With the advice of a bean counter, they find ways to offset a variety of outgoings against tax and thus decrease the tax they have to pay. Some self-employed people have told me that they don’t pay nearly as much tax as employees.
I once worked for a while for the other side, at a Tax Office. They had just one inspector of taxes dealing with all the employed workers in their district, but ten inspectors dealing with the rather more limited number of self-employed workers of various kinds. This is because the system for tax computation for the self-employed, are much more complex.
Over the years, HMRC has developed stricter rules about the definition of self-employment. A significant number of self-employed people who work in someone else’s office, or even work from home, have been told they are in reality employees since they cannot determine their own work timetable.
Therefore, those who wish to reduce their tax payments must genuinely work for themselves. There exist some genuine self-employed opportunities in Internet business. You could establish your own business online, or work in online jobs as representatives of another business, but can still be taxed as self-employed since you decide on the hours you work and work that you do. If you work from home you can trim down your expenses even more, yet those expenses that remain may still be claimable against tax. Nevertheless it is essential to obtain an accountant’s advice on what you can claim for. Make sure also you get tax returns in before the stated deadlines, or you might have to pay a penalty.
Many the self-employed are sole traders, therefore they will still pay income tax, albeit subject to expenses deducted. There are also those who form a business partnership with another person. Where this happens, one nominated partner is responsible for filing a Partnership Return reporting on every partner’s share of the profits or losses. A third alternative is of course to create a company, in which case you are, theoretically at least, an employee of the company and the company ‘pays’ you a salary, out of which you pay normal income tax. Any profit made by the company (after your salary is paid) is then taxable under Corporation Tax. One plus point of establishing a company is the limited liability it gives shareholders.
Taking one of the self-employed opportunities in online jobs in Internet business is one of various ways in which it is possible to become self-employed and minimize the taxes you pay, with the guidance of a tax accountant (and his advice may itself be be claimed back against tax). But, it must be repeated, never omit to seek professional advice on all tax issues, if you take the plunge and choose the self-employed route.
