PAYE or Self Employed?

DanC_Hoddesdon

I've been PAYE since starting work 20yrs ago. I've just been offered a job doing the same thing (mainly office work) but on a self employed basis. Can anyone tell me the pros & cons please?
Will it affect my ability to renew my mortgage next year?
Is it easy to work out tax & NI contributions?

Thanks.

no-oneknowsme

DanC_Hoddesdon wrote: »

Is it easy to work out tax & NI contributions?

Thanks.

If you do go self employed , you will be responsible for filing your own tax returns every year . If you chose to do this online which is really the easiest way of filing , your tax and national insurance calculations will be done for you by HMRC. You wont need to worry about the calculations .

As a rough guide though , from your self employed earnings you will have to pay 20% tax and 8% NIC's.

diable

No holiday or sickness pay.

Kiramanic

Most places ask for a few years self-employed accounts as proof of income for mortgages (I think 3 is about average) so you might struggle, but tbh I'm not sure whether it's any different renewing the mortgage rather than getting a new one so this was pretty much an entirely pointless sentence! I'm tired.

Filing tax returns is easy enough, the amount you owe is worked out for you, and NI is charged as a set amount a week so there's no working out of numbers there either. The only difficult bit is having the willpower to put away a huge chunk of your earnings into a "tax time" account to cover it all instead of spending it on celebratory wine

KiKi

DanC_Hoddesdon wrote: »

I've been PAYE since starting work 20yrs ago. I've just been offered a job doing the same thing (mainly office work) but on a self employed basis. Can anyone tell me the pros & cons please?
Will it affect my ability to renew my mortgage next year?
Is it easy to work out tax & NI contributions?

Thanks.

Before you do anything you need to establish whether or not this job is actually self-employed. The company might *want* to employ someone on a self-employed basis because it means they don't have to pay NI or tax, or provide employment protection. However, HMRC have strict guidelines on what comprises self-employment and what comprises employment - it's not up to you or the company to decide that. As a rule of thumb, if you're employed full time, if you work to their direction, if you can't refuse work and if you work on their premises then you're not self-employed. But look at the HMRC website for their criteria.

You'd need to add around 40% in an ideal world to your current salary to pay for NI, tax, holidays, some sick pay and expenses, pension (if applicable). NI and tax alone is 28% of what you earn (give or take your tax-free allowance). Filling in a tax return for that is pretty simple.

You will have almost no employment protection whatsoever as a contractor. You don't get annual leave, sick pay, redundancy - you are simply working on a contract on your own time.

Some larger companies won't allow you to work for them as a sole trader (ie, you have to have a limited company set up) and may require you to be VAT registered. Being a limited company has other responsibilities; you need an accountant and would effectively be employed by the company, running your own tax and NI PAYE system.

Self-employment can and does affect mortgage applications - you will need proof of earnings to show that you can support the loan you're requesting. That might not be a problem, but just as equally it might be seen as less stable employment as you could be asked to stop work with very short notice. If you don't have evidence of earnings for very long it might influence the application, depending on the lender's criteria.

HTH
KiKi

Hammyman

DanC_Hoddesdon wrote: »

I've been PAYE since starting work 20yrs ago. I've just been offered a job doing the same thing (mainly office work) but on a self employed basis. Can anyone tell me the pros & cons please?
Will it affect my ability to renew my mortgage next year?
Is it easy to work out tax & NI contributions?

Thanks.

Cons:
No protection under law as an employee
No employment rights
No holiday pay
No sick pay
Not guaranteed to ever see the money you invoice them for and even if you do, it'll be late because of some reason or another. Also many companies pay on 60 day terms on monthly invoice which in reality means you wait 90 days to get paid for the first days work

Pros ( IF IT IS TRULY SELF EMPLOYED ):
You get to pick the hours
You get to choose where to work
You get to send someone else in when you can't be bothered


It won't affect your mortgage if you are still on PAYE as well but it WILL affect it if you're only self employed in the first couple of years of trading.

No need to work out NI and Tax - just put 25% of every invoice received in the bank in a savings account and if you complete your self assessment before Oct 31st, HMRC work it out for you and send you a bill.

KiKi

Hammyman wrote: »

You get to send someone else in when you can't be bothered

If there was a 'like' button on here, I'd like this.

KiKi

Jowo_2

As indicated previously, it isn't up to the organisation or their supplier/employee to decide if the role is self-employment. The HMRC take a dim view of disguised employment (where there is little to distinguish the services/structure of duties provided by the SE person from a regular employee). People end up with huge tax bills to pay if they can't demonstrate that they are truly self employed. Here's the HMRC guidance.

http://www.hmrc.gov.uk/employment-status/index.htm

DanC_Hoddesdon

Thank you for your replies everyone, very helpfull!

Looking at the HMRC website is says the same that neither the employer nor I can choose whether I am self employed or not, it depends on the terms of the job, yet I could answer yes to all the questions that indicate I would not be self employed?

I'm still confused?

They have told me that I would be self employed so I would need to invoice them once a month to get paid, surely that can't be interpreted any other way? If they are not paying my tax & NI then I must be classed as self employed??

KiKi

DanC_Hoddesdon wrote: »

Looking at the HMRC website is says the same that neither the employer nor I can choose whether I am self employed or not, it depends on the terms of the job, yet I could answer yes to all the questions that indicate I would not be self employed?

I'm still confused?

They have told me that I would be self employed so I would need to invoice them once a month to get paid, surely that can't be interpreted any other way? If they are not paying my tax & NI then I must be classed as self employed??

Exactly - they are asking for you to be self-employed when they shouldn't be. They are either ignorant of HMRC's requirements, or they are deliberately trying to get out of paying NI, tax and giving you employment rights.

Not sure what to suggest as a course of action, though - especially if you want the job. By taking it there will be implications for you and the company. But I don't know enough to advise, I'm afraid.

KiKi