CIS Taxes and Deductions

Taxes

Each week will make the appropriate tax deduction from you and remit this as a payment on account on your behalf. Most subcontractor deductions are made at 20%. In certain circumstances CIS subcontractors will be verified for 0% (gross) deductions. If HMRC cannot match your details under CIS or if they instruct us to do so you will be deducted tax at 30%. If you have income from self-employment you will be required by law to file an Income Tax Return with HMRC. The total amount of tax due is then calculated based on your taxable profit (which is your earnings minus any expenses claimed). Any tax payments you have already made, usually at 20%, during the year is set off against the total amount of tax due and you could end up with a tax refund if you have paid too much tax.

It is also worth pointing out that if your earnings for the year reach the higher rate tax thresholds you may also have more tax to pay, your own accountant will be able to advise you on this point.

National Insurance

When you are self-employed you must keep up with your Class 2 National Insurance (NI) contributions, which for the 2011/12 tax year are payable at a flat rate of £2.50 a week. You may make these contributions monthly by direct debit to HMRC (taken in arrears, usually on the second Friday of the month) or you may opt to receive a quarterly bill payable by cheque, debit card or bank giro.

When you complete your annual self assessment you will may also have to pay to Class 4 NI contributions as calculated on the profit you have made whilst earning your living as self employed.

Expenses

Unlike Umbrella PAYE, you are not entitled to claim business expenses on a weekly basis. However, you can claim your business expenses annually as part of your Self-Assessment Tax Return.  To ensure your expenses are recorded accurately and are kept in good order we recommend you consider Expenses Track.

Annual Self Assessment Tax Return

You must declare the income received for the self-employed work you undertake for by Sprite and you are responsible for completing and filing an annual tax return with HMRC at the end of the tax year. You are also responsible for paying any tax due once HMRC has processed your return.

Although we do not prepare the tax return on your behalf your business's accountancy advisors will normally offer this service or alternatively we can suggest a firm of accountants who will process your expenses claims and calculate any tax owing or submit any claims for tax refunds..