Becoming Self Employed?

richt71

borgman wrote: »

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

I'd of thought you were at the level were being self employed possibly via a setting up a limited company might be a good move for you as I presume you get taxed at top level tax (just). Certainly on the £7k-£13k you could pay 19% via a company structure with dividends and corporate tax opposed to your 40% income tax at present. You'd also save 1% of most your other income. Needs to be structured right via an accountant though.

under15s

Phew .. there's some good stuff in there. About 14 years ago I was invited to clear my desk - i decided there and then that no-one would be my boss again. I set up as a sole trader selling on commission only - selling for my previous employers competitors straight into his market. (revenge is a dish served best when it's straight in your face :j
After a few years I also set up a limited company in a different market place.
There's a few things that I think the thread has missed - but be aware of my comments here, they may be a few years out of date.

1. find small businesses nearby in completely different markets who (you guess) have the same turnover as you. Knock their doors, ring their bells and say 'are you happy with our accountant, do they save you money' if so - get the accountants number.

2. if your customer base is a business consumer - VAT register straight away. If they are 'home' end users who can't get vat back be cautios about vat registration.

3. you can be self employed as a sole trader and the director of a limited company and an employee all at the same time.

4. with limitd companies - you are employed by the company as a director.

5. as regards motors - buy your own, and pay yourself 40p per mile for first 10k (I think) miles. Totally tax free. If you're vat registered, you can then claim the vat on 19p(I think) of the 40p (2.5pish).

6. Keep all receipts (absolutely everything) that you spend that could be seen as helping you start/run your business. You can back claim for vat spent for up to 3 years prior to vat registration. (Check this one, it may be out of date).

7. vat is NOT evil - its a menace - but not evil. Handled the right way (cash accounting for small businesses) it can be your opportunity to earn interst on the governments money for up to 3 months. The beauty of vat registration is that it forces you to do at least some paperwork every 3 months.

8. HMRC inspectors have all sorts of ways of checking you out - nerver, ever, ever think you can outsmart them. They can be very helpful - it was actually a vat inspector who told me about the reclaim on the 19p of the fuel - my previous accountant had missed this, and this one liner is now worth £600-£800 per year for my business - ie it pays the phone bills.

9. as a sole trader you and your business are totally inseperable - ie you are betting the family jewellery. As a limited company you have a lot more paperwork, but as long as you stick to the rules you are seperate from your business.

10. tell insurance companies everything - especially when you employ people (by the way we've just save a shed of money by changing from Norwich Union to Hiscox)

11. If you get customers you dont/cant like who query every invoice - they ain't worth it, life's too short. Deal with nice people - there are millions of them out there.:beer:

borgman

Thanks to everyone who has commented. Clearly a subject of interest to people.

WHA

If you think that you are likely to be caught by IR35, then if you have a choice, you are probably better operating as a sole trader than though your own limited company. Some firms and all agencies will only give the options of PAYE or limited company, but if you find yourself a firm that is willing for you to work as a sole trader, and if the terms of your contract are likely to put you within IR35, then go for the sole trader self employed option.

The reasons are two fold.

Firstly, if you are a sole trader, and the HMRC decide that you are really a disguised employee, they go after your "employer" for the tax and NIC, not you!!

Secondly, if you go through your own ltd company and pay yourself under IR35, you pay both employees and employers NIC at a total rate of around 25% compared with just 8% self employed sole trader national insurance!

The limited company route is really for where you are likely to escape IR35 or where your agency/firm won't allow you to be self employed!