New year, new laws…a brief guide to some of the changes
Welcome back to guest writer, Mark James. The legislation changes outlined in his article are only applicable to UK freelancers.
First off, congratulations for surviving all those 2012 Armageddon-based predictions. What a load of nonsense that turned out to be.
That said, don’t take that bigger sigh of relief just yet, as an abundance of new HMRC and government legislation is set to be unfurled this year, which, if you don’t get up to speed on, could have a cataclysmic impact upon your finances.
Thankfully, you’ve got finance bods like me to make things clear as day. Well, as clear as it’s possible to make this sort of thing.
So, if you’re a little lost, here’s an overview of some the changes that might impact on your freelancer finances this year…
January – Child Benefit changes
If you’re amongst those earning over £60,000, from January 7th you’ll lose your entitlement to Child Benefit, while those earning over the £50,000 threshold will see their Child Benefit payments reduced. If you’re amongst the freelancers in these pay brackets, bear in mind the implication this could have on your finances.
April – introduction of Real Time Information
If you’re a limited company freelancer, Real Time Information is something that you’ll need to get up to speed with. Conversely, if you’re a sole trader, then you needn’t worry.
To the uninitiated, It’s a new scheme designed to streamline the flow of payroll information between employers and HMRC, the basic thrust of the scheme being to ensure the payroll information HMRC holds for your company is as up-to-date as possible. This will be achieved by requiring companies 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.
April, again – rate and threshold changes
As you’ll probably know, the 6th April ushers in a new tax year. This year, there’s a number of rate changes. Amongst the highlights you’ll find…
- 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
- and a lowering of the Additional Rate from 50% to 45%
It is crucial that you’re aware of any changes that are relevant to you, so start by examining your current financial position and how the above might impact upon you.
October – Universal Credit
Elsewhere, if you receive Income Support, Working Tax Credits or Child Tax Credits, your payments will be changing with the introduction of the Universal Credit. The usual political toing and froing makes it hard to decipher whether its introduction is a good or a bad thing, but you can get a basic overview of just what this new piece of legislation means here.
Of the incoming legislation, 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 the right steps to achieve optimum tax-efficiency. 2013 might then be a bit more profitable than the last!
Mark James is an in-house writer for online accountants Crunch, and a regular contributor to Freelance Advisor.
