As a freelance contractor, it’s essential to understand your tax responsibilities, including Value Added Tax (VAT). VAT is a tax imposed on goods and services by the government, and it’s paid by the end-user or consumer. If you’re a do-it contractor, you may be wondering whether you should charge VAT to your clients.
The short answer is, it depends on your annual revenue and whether you’re registered for VAT. If your annual revenue is less than £85,000, you’re not required to register for VAT, and you don’t need to charge it to your clients. However, if your revenue exceeds £85,000, you must register for VAT, and you must charge it to your clients.
Registering for VAT may seem daunting, but it has several benefits. Firstly, it gives your business a professional image and can increase your credibility. It also allows you to claim back VAT on business-related expenses, such as office supplies and equipment.
If you’re unsure about whether you should register for VAT, it’s always best to seek advice from a tax professional or an accountant. They can help you determine whether registering for VAT is right for your business and guide you through the registration process.
It’s important to note that if you do register for VAT, you must charge your clients the current VAT rate, which is 20%. Failure to charge VAT when required can result in penalties and fines from HM Revenue and Customs (HMRC).
In conclusion, as a do-it contractor, whether you charge VAT to your clients depends on your annual revenue and whether you’re registered for VAT. If you’re unsure about your tax responsibilities, seek advice from a tax professional to ensure you’re following the regulations and avoiding any penalties.