Employed Vs Self-Employed advice needed

MissMotivation

Can someone give me an idiots guide to self-employment please?

Brief outline, I've just been offered a job and I have a choice of being employed or self-employed.

I know, next to nothing about Tax....except that I pay a lot of it!

If I went self-employed then the company would pay me a retainer equal to the basic salary, there is also a company car.

The company implied that if I was self-employed then I would probably end of paying less tax BUT this seems to good to be true.

I would also be claiming Working and Child Tax Credit, would being self-employed affect my claim in any way?

Is there something that I am missing because being self-employed seems to have more benefits?

Pennywise

If they're going to pay you the same whether you're employed or self employed, you should opt for employment - that way you'd get employment rights, SMP, SSP, redundance, paid holidays, etc, also better state benefits than self employed.

Your "employer" should be offering 25% to 50% more for you to be self employed as they're immediately saving 12.8% employers NIC and abdicating themselves of any obligations re employment rights and the benefits outlined above. They can also "sack" you at a moments notice and you have absolutely no rights for unfair dismissal, discrimination, etc.

You "may" get some tax advantages by being self employed, but the biggest advantage in being self employed is usually a much higher rate in the first place. To be honest, I think they're tacking the mickey by offering you the same rate either way!

Ste_C

What line of work are you talking about?

Have you considered insurance implications? If you do a job for someone and you're self employed then you're liable for anything that goes wrong. This obviously changes if you're doing the job as an employee of a company.

Are they offering you a contract? The security of that would be good right now. As Pennywise says, it seems like they're trying to pass on as much responsibility as they can on to you.

dunstonh

self employed also get lower state pensions. You would only qualify for the basic state pension and not the second state pension. The second state pension can nearly double the basic state pension (for older people it can be more than double, for those just starting out now it will be less than double).

To make up the difference would be roughly equivalent to around £100k in a personal pension fund. To fund that gap would take someone with 30 years to go to retirement around £150pm gross.

The Govt view is that the self employed prefer to pay less tax/NI and make their own provision. Problem is that most self employed dont appear to realise that they wont be getting as much from the state until its too late.

fengirl_2

Being provided with a company car does not sound like self employment to me - rather a way for your employer to avoid his repsonsibilities. Being self employed means you have no employment rights and can be let go at any time.

MissMotivation

Thank you for all the replies.

From what I can gather from the info that the "employer" has given me, I would have a contract, I would still get holiday pay and everything would be similar to be being employed.....he was really convincing that being self-employed would be more beneficial to me. I wonder if I went back to him and tried to negotiate a better retainer considering the amount of money he will be saving!

Ste C, I'm an estate agent, the company that have approached me is a new business, no other employees at the moment. He is offering me a contract after a one month trial period.

He also mentioned that I would have to have a credit check and a crb check too which is not something that I have come across before in my line of work.

mitchaa

What are earnings likely to be?

Are you sure you are entitled to WTC as i know the thresholds are set low £15kish rings a bell.

I would opt employed everytime, you have no rights as SE, i would look a bit further into his 'promises' of holiday pay etc. I can't see how that would work?

fengirl_2

There is even more evidence here of employment, rather than self employment. I think the employer is trying to avoid NIC and holiday pay, etc. An estate agent would almost certainly be an employee and part of the firm s/he represents. A one month trial period is a bit meaningless as they can dismiss you within a year anyway.
You cannot get a CRB check unless you are working with children or vulnerable adults and I belileve it is unlawful to apply for one if the employee falls outside of that criteria.

MissMotivation

mitchaa wrote: »

What are earnings likely to be?

Are you sure you are entitled to WTC as i know the thresholds are set low £15kish rings a bell.

I would opt employed everytime, you have no rights as SE, i would look a bit further into his 'promises' of holiday pay etc. I can't see how that would work?

The basic salary/retainer is £12,000 (which is crap)
The OTE would be in the region of £25,000

The reason I am so interested is the flexibility he is offering, shorter working hours than I've been working and it's in my hometown so it would cut out the current 2 hour commute I do......if it wasn't for these things then I would'nt consider it at all!

tyllwyd

I think it looks very dubious that you would actually be self-employed. Have a look at the HMRC guidance
http://www.hmrc.gov.uk/leaflets/es-fs1.pdf

But I don't understand why he says you would pay less tax as self-employed - he would pay less tax, but I didn't think there was much tax advantage for a self-employed person. You could claim some expenses against your tax I guess.

I claim working tax credit & child tax credit, and being self-employed doesn't affect it as such - you have to tell them your annual income and they calculate it from that. The biggest pain is that they want the info in the summer, but the tax return doesn't have to be in until January. Obviously if your profit changes a lot from one year to the next there is a greater danger of over or under payments.

Oh, and just in case you are planning on having a baby in the near future, make sure you understand the implication of whether you could claim SMP or maternity allowance.

lesley1960

I was under the impression you cannot be self employed if you work only for one company . We have had a few conversations with HMRC about this in relation to our transport company and we know we cannot have self employed drivers , even if they only work for as on occassions .