Self Employed or PAYE - Offer to choose, which is best

Never_Enough_Money

Hi

I was wondering if someone could give some advice, hubby has been offered a job today, but unexpectedly he can choose to be self employed or paye. He would get 5 weeks paid holiday with both options I think. Not sure about sick pay need to find that one out. He has been asked to let them know by tomorrow! We need to work out which would be financially better for us.

This is not really something that we have considered and need to understand. If he is self employed I understand that he has to pay the tax for the employee and the employer as well as national insurance contributions, but can he claim expenses that he doesn't pay tax on, if so what kind of things would these be? Can anyone advise? Is there any financial benefit to being self employed?

Thanks in advance

nexus2011

Is it a job in the construction industry ?Self-employed he would not get paid holidays.He would also not get sick pay from the company.

Never_Enough_Money

Hi, it is in the construction industry but office work, so they have said that they would honour this whichever route he takes

nexus2011

In my own personal opinion i would choose PAYE as it would make you feel more secure and give him more rights if anything goes wrong.He will also get paid holidays and sickness.You may feel better off with the larger weekly/monthly wage if self-employed but you will also have the tax bill to sort out at the end of the year which a lot of people put off until the last minute and then face financial difficulty.

HappyMJ

My personal opinion as well. I am never again in my life going to work as PAYE if I can help it. The expenses allowed as a self employed person far outweigh the security of PAYE employment which you don't even get until you have been employed for 12 months. I'd rather the larger "NET" pay packet. It's not really bigger it for me is only £35 per week cash but it includes all motoring expenses and all computing and telephone expenses as well. It does however have it's disadvantages such as getting mortgage or a loan. You won't have any proof of a decent income as you would have minimized it to legally minimize your tax liability. You'll also need to spend time doing the accounts (or pay someone to do them) and you need to be careful to NOT spend the money in the bank set aside for the tax office.

Financially you'll be better off self employed.

McKneff

Its not up to the employer or the employee whether a job is self employed or not.

It is an HMRC decision and the job has to fit the criteria for self employment. Office jobs wouldnt normall fit the criteria.

Give the Tax people a ring before they need the decision to clarify.

Self employed people get absolute nothing other than payment for an invoice for a week/months work.
No holiday pay, no sick pay, they pay their own tax and NI so i think the employer is getting himself a bit mixed up and could get into trouble.

By the way, go PAYE, its far more secure.

KiKi

Hi OP

They shouldn't be letting your OH choose. HMRC have strict guidelines as to what is self-employment and what isn't. Look up 'self employed' on the HMRC website and it will give you a list of criteria (not exhaustive).

But to help you, if you're self-employed:
* No paid leave
* No sick pay
* No employment protection (redundancy, discrimination, notice periods etc)
* You must correct work mistakes in your own time
* You have to pay NI but it doesn't entitle you to all benefits if you need them
* If you are laid off with or without notice you're not entitled to all JSA straight away

* You can send someone else to do your work
* You can refuse work and control what you do
* You can claim reasonable expenses, but not sure what ones he'd have. I work from home, so include stationery, postage, equipment like my laptop, some travel, some training etc.
* The expenses you have are added to your tax-free allowance (typically £7475 a year) and you only pay tax on anything over that. Eg, if you spend £1000 on expenses, then your tax-free allowance becomes £8475. However, unless you have a lot of expenses, this isn't necessarily worth it

* You have to complete a tax return each year, and therefore have to make sure you save the NI and tax element of all earnings separately so you can pay it off
* You have to submit invoices for all work done, and keep all receipts (and a record of them) for 6 years.


To be honest, it sounds like an 'employed' job if they're prepared to pay holiday. And if he can't refuse work, or choose when he works, then it's highly likely to be employed work. I'm not sure what benefit your OH would get from being self-employed, whilst having no employment protection.

HappyMJ says that you're better off financially, but this only applies if you have expenses, and I'm not sure your OH would. Also, you're not better off financially if you need to access certain benefits, as NI when SE doesn't give you all that employed NI does.

Check the HMRC list first - the company should not be offering the choice. It's HMRC's call, not theirs or your husband's! The company should NOT be offering paid holiday for SE people; it doesn't work like that. They're either ignorant of the law, or trying to get out of their employment obligations. (I'd be going PAYE, if it were me.)

KiKi

Never_Enough_Money

I think that by self employed they mean set up a limited company?? or use an umbrella company, the job is for 18 months, so it is not permanent. He is an accountant so doing the tax return, keeping financial records etc wouldn't be a problem.... it's not an area we are familiar with, thats the problem, they are really asking a a lot for him to let them know tomorrow.

nexus2011

There is no need to list all the above from the HMRC as there is plenty of jobs in the construction industry that offer employed and self-employed based on the job and circumstances concerned.THEY ARE ALLOWED BY HMRC TO STATE THIS.

nexus2011

Never_Enough_Money wrote: »

I think that by self employed they mean set up a limited company?? or use an umbrella company, the job is for 18 months, so it is not permanent. He is an accountant so doing the tax return, keeping financial records etc wouldn't be a problem.... it's not an area we are familiar with, thats the problem, they are really asking a a lot for him to let them know tomorrow.

No offence but if he is an accountant he should know all this.

pipscot

McKneff wrote: »

Its not up to the employer or the employee whether a job is self employed or not.

It is an HMRC decision and the job has to fit the criteria for self employment. Office jobs wouldnt normall fit the criteria.

Give the Tax people a ring before they need the decision to clarify.

Self employed people get absolute nothing other than payment for an invoice for a week/months work.
No holiday pay, no sick pay, they pay their own tax and NI so i think the employer is getting himself a bit mixed up and could get into trouble.

By the way, go PAYE, its far more secure.

I agree with this - the employer needs to check with HMRC but presumably they have already done this (and there is not much the "employee" can do about it anyway).

I would take the PAYE route. You don't have to worry about tax bills, your NIC are paid for you, you should get paid holidays, sick pay. Also some employment law such as breaks and working hours do not really apply to the self-employed.

You may be slightly better off financially by being self-employed (but with an office job there aren't going to be that many expenses to claim). Some employers pay slightly higher rates to self-employed so that could be factored in.

Hope that helps :):)