Tips to help you keep track of your contracting income

If you work as a contractor through your own limited company, it can be hard to keep track of your finances. That’s why we provide the option of an ongoing book-keeping service to all our limited company contractors. This service helps you manage and monitor your income so you know how much you have available at any given time. Importantly, it helps you avoid costly mistakes, such as failing to set aside sufficient money to cover your tax bill at the end of your financial year.

In this article, Mike Wilson, Manager here at Crest Plus Accounting, looks at the basic principles of good record-keeping which are essential to all contractors. Follow these tips and you should always know where you stand financially.

Tip #1: Force yourself to be methodical
The best way to manage your income is to keep accurate records of income and expenses. We can support you in doing this. This doesn’t mean you have to be a slave to paperwork, but it will mean you have a clear picture and will know how much money you have available to spend at any given time.

For ease, we can produce monthly management statements. We also manage your payroll so that you receive your correct salary on time. Once a quarter we provide dividend documentation and highlight how much dividend tax you will have to pay based on the amount of dividend you have taken.

Tip #2: Get into the savings habit!
As a limited company contractor, it’s important to remain vigilant to the fact that the money you have in your business bank account is likely to be more than the income you can spend. This is because you’ll still need to pay corporation tax, dividend tax, VAT (if you charge VAT) and business expenses.

Our monthly management income statements and book-keeping service will help you keep track of what money you have available once your tax and VAT is accounted for. It’s a good idea to set aside savings to cover your tax and VAT bills, otherwise you might get a nasty shock when these have to be paid.

Tip #3: Keep a record of your expenses and file your receipts
As a limited company contractor, you will be able to claim legitimate business expenses for work-related costs and mileage – for more information, read our guidance on business expenses. You can record your expenses on our book-keeping system and you must submit receipts for purchases.

Get into the habit of updating your expense records each week or month so that your records are accurate and up-to-date and you have a clear picture of the money you have available to spend.

For more tips and advice on managing your income, please visit our blog.

If you would like to find out more about limited company contracting with Crest Plus, please get in touch with one of our specialist contractor accountants on 01244 684700.