sole trader or contractor

taxidriver1

Hi there, a question for someone more knowledgable than me.

here's my situation

I am working part time taking home about £500 per month.
I have been offered work part time on a day rate - £100 per day and have done some days.

so i am employed, and also self employed.

the work that i have been doing for this small business I could also do for other businesses, if i got the work. I have heard that it is more beneficial tax wise to be a "contractor" on IR35, than a sole trader - "taxi driver services".

I obviously want to pay as little tax as possible. never had my own business, always been PAYE and used to be a high rate tax payer. - things have now changed!.

if anyone could advise me i'd appreciate it. i've earnt a bit so far on the day rate and want to ensure i'm above board and paying the right tax.

any advice greatly appreciated.

TD

PlutoinCapricorn

I think that most taxi drivers are sole traders when they work just for themselves or several clients for whom they do not have a regular commitment,

Have you tried asking the Taxi Drivers' Federation, or other drivers who are doing what you are? The Federation may be able tp recommend accountants who will give you a free short consultation.

See www.taxiregister.com/selfemployed.php

and www.taxfix.co.uk/forum/articles/tax-return-for-taxi-drivers-what-you-should-know.html



www.businesslink.gov.uk is also useful for starting up as self employed.

IR35 often applies to the IT industry, where contractors have limited companies or use umbrella companies.

paddyrg

The costs involved in becoming a ltd company and the complications it entails will wipe out a lot of benefit at £6k/yr

WhiteHorse

paddyrg is right. Going limited is generally to be avoided.

InsideInsurance

It is generally not to be avoided but generally people earn more than £6k/ year.

Not sure what you mean "be a contractor on IR35". IR35 relates to contractors, and not exclusively the IT industry, but is to do with people using LTDs to mask their true employment status and reduce their tax liabilities. When you take on a contract you typically can review it and try and judge if it is inside or outside of IR35. If it is inside then you must pay yourself a large salary etc which massively reduces your tax benefits. If you are outside of IR35 then you can do the usual limited company tricks of small salary, dividends, using others as part time employees or shareholders etc to mitigate your taxation.

A contractor is basically a relationship type, you can be a sole trader, employee of an umbrella or director of a Ltd and still be a contractor. Because of the clients own liabilities most larger clients will not take on sole trader contractors as in addition to IR35 for you it also open them to liabilities by being "accused" of being an employer and so having to pay Employers NI as well as benefits etc. Hence they want you to be a Ltd or umbrella as that way you are technically already an employee but of the Ltd or umbrella no them and so removing that risk to them.