Becoming Self Employed?

borgman

Hello
I was wondering if its better for me to become self employed?

I currently earn approx 45k - 50k (sales related) for a small company.
I get no health cover or sickness benefit and no pension.
I get a company car as I drive over 30,000 miles a year for my job.
Just 20 days holiday per year 4 of which i must keep for Christmas.

Would i be better off becoming self employed and working as an agent selling the products on a commission only basis.

thanks for any help

EagerLearner

I think so - I am self employed but have only been so for 2 months - seems like you don't get enough perks to warrant staying on a PAYE status?

Then the tax benefits of being self-employed are great as you can offset a percentage of your expenses to your business, such as gas, council tax, electricity, petrol, home phone, mobile phone, stationery, office equipment and much more.

Plus you get to keep the money you owe the tax man in a savings account/ISA throughout the year and enjoy earning the interest!

I am sure someone will come along soon that is more knowledgeable than I am as I have only just started - there's much more I want to learn as well.

amf

There is possibly a bit more to this issue than just deciding you want to become self employed.

The decision as to whether you are self employed or an employee depends on the working arrangements - the work you do and the way it is done. You cannot decide yourself that you fancy being self employed from Monday. For example, a barman could not decide that he wanted to become self employed.

There is no legal definition of self employed. There are, however, many cases on this issue which have come before the courts for consideration. This is a specialised area but any professional who is familiar with the subject will know what factors the courts consider relevant in deciding this issue. Beware that most accountants will advise you....but they will consult specialists, even in HMRC and pass on the second hand advice as their own. Best advice is to get an accountant specialising in this area.

To change from employee to self employed (the jargon is from E to D) the terms and conditions will need to change. Factors showing the necessary badges of self employment will have to be evident. The good news is if your "employer" gets it wrong the tax man will chase the company for the PAYE duties it should have deducted.

And, yes, as a general rule you are financially better off self employed.

WHA

The main benefit of being self employed is that your "employer" should pay you are far higher rate than you earn as an employee. This is because they don't have to pay employers NIC, don't have to pay holidays, don't have to pay sick/mat/pat leave. If you stay on the same rate as an employee, your employer is winning and you are losing. As a rule of thumb, you should be getting at least 20% more from your employer - that is simply the 12.8% NIC and their costs of the company car and paid leave. Negotiate for say 25% more.

As already said, you and your "employer" have to act as if you are self employed, which really means that you need to be free to work for other companies (i.e. not restricted to the one), you must work from your own premises (not a desk in the employer's office), you need reasonably freedom to sell the good (i.e. your employer must not "tell" you when and who to see), and probably most importantly, you must be paid little or nothing except for commission from sales - so no sales, no pay - i.e. the true "risk" of being in business.

borgman

thanks for the replies.

The industry I'm in is made up of lots of self emplyed agents aswel as employees.
My previous company provided many more perks than my current company and in the past they have had self employed agents carrying their range of products. So it would be a completely legitimate and acceptable arrangement. I was just trying to nett more money at the end of the day.
Do self employed people still pay 40% tax?

thanks

amf

borgman wrote:

thanks for the replies.

The industry I'm in is made up of lots of self emplyed agents aswel as employees.
My previous company provided many more perks than my current company and in the past they have had self employed agents carrying their range of products. So it would be a completely legitimate and acceptable arrangement. I was just trying to nett more money at the end of the day.
Do self employed people still pay 40% tax?

thanks

The construction industry has many employees being treated as self employed sub contractors! Just ensure that your working arrangements are more pointing towards self employed than employee, if you want to ensure your are legit.

All people who earn enough pay 40% tax - the self employed are not discriminated against or for http://www.hmrc.gov.uk/rates/it.htm

ukbill69

I went self employed as a ltd company and I got a rise of 90% of what I got. I claim my wages as dividends and pay 19% tax, that can cut your tax bill, but still have to pay my accountant £500 per year and your my own books. But you can only work for the same firm for 2 years max otherwise the you might come under IR35.

WHA

ukbill69 wrote:

But you can only work for the same firm for 2 years max otherwise the you might come under IR35.

You can be caught by IR35 on a three month contract and some people are outside IR35 even though the have been at the same "employer" for far more than two years. Length of time is just one of many factors, and certainly not the most important either way.

borgman

ukbill69 wrote:

I went self employed as a ltd company and I got a rise of 90% of what I got. I claim my wages as dividends and pay 19% tax, thats cut my tax bill, but still have to pay my accountant £500 per year and do my own books. But you can only work for the same firm for 2 years max otherwise the you might come under IR35.

that sounds interesting?

Lifeisbutadream

Can I ask this as a question from the other way round?

We have a small joinery business and have a contractor working with us for 90% of the jobs we do. He has his his own business as a self-employed joiner and takes on work himself too.

Does that mean that we should have him an en employee? We dont want him to be (not that hes no good! - just that we dont always have work) - and I know that he doesnt want to be. We would obviously have to pay him less if he was employed and we would have to find work for him all the time.

Becks_in_Debt

I became self employed 4 months ago, and as i havent had to do a VAT return i havent really looked into it, although i do get my tax bill through every 13weeks from IR which is loads cheaper. What kind of things can i claim VAT back on, as there are no leaflets that actually tell you. Or does it really depend on what kind of self employed work you do? Is is true that you can not be self employed if you are based at 1 premises