Self employed or not? Financial advice (tax)

Beta_Block_Party

I am leaving my current full time job shortly and taking on a new part time job, three days per week.

So I have two days 'spare' which I was going to fill with some occasional freelance work. But my current employer has asked if I will actually still do two days for them, on a permanent basis, and I have agreed.

Since I have a new employer, I suggested the best way to proceed with this is for me to resign and start invoicing them each month for the two days per week. I just thought it might be complicated having two jobs.

But am I making a mistake? Should I stay 'on their books'?

I was planning to charge my current employer the same as I currently earn for two days work, but adjusted to account for no holidays.

If anyone can advise (particularly on the tax front) I'd be grateful.

katsu

Stay on the books as you aren't self employed. That way you will be taxed correctly as you say this is a permanent arrangement.

InsideInsurance

It isnt complicated, you'd just fill in a P46 and state it is a second job when you start the new job and the rest will sort itself out.

There are often tax advantages of not being an employee but you lose the protection of being an employee. The issue in your proposed situation is that unless you go through an umbrella or form an Ltd then there is a good chance you'd still be considered an employee by HMRC despite a new contract saying your a contractor.

Even if you did go via a Ltd then there is a reasonable chance of being found to be inside IR35 and thus losing most of the tax advantages.

As a contractor you get no holiday, no sickpay, no pension etc and so you'd need to negotiate a day/ hourly rate that reflects the new situation - if they are generous then the rest of the issues may be worth putting up with. If they say you stay on the same money then there is almost certainly no point in doing it

Beta_Block_Party

Really appreciate the advice! Thanks both.

I suppose in the back of my mind I am a little apprehensive about how long things might last with my current employer and this new two day arrangement, so the 'flexibility' of being released from their employ seems attractive. But I don't want to lose out financially obviously.

I am going to be working at home for them. I don't get sick pay or pension currently anyway and they are a small firm so no great benefits.

My new employer is a large organisation who do offer those things.

heretolearn_2

There is nothing complicated about having two jobs, lots of people do it.

Also you can't just decide you feel like being self-employed. The HMRC decides and if you try to claim that you are when you aren't, your 'employer' could get in hot water. There are very specific conditions on being self-employed, some of the basics being can you set your own work hours, do you provide your own materials/equipment, and are you contracted to provide a service rather than yourself personally (so are a business really) and could send someone else in to do your job if you weren't available/your business expanded so you took on employees yourself...

Just have two jobs.

LittleVoice

Beta_Block_Party wrote: »

Really appreciate the advice! Thanks both.

I suppose in the back of my mind I am a little apprehensive about how long things might last with my current employer and this new two day arrangement, so the 'flexibility' of being released from their employ seems attractive. But I don't want to lose out financially obviously.

I am going to be working at home for them. I don't get sick pay or pension currently anyway and they are a small firm so no great benefits.

My new employer is a large organisation who do offer those things.

You would still be entitled to SSP.

Eventually you could, depending on the size of the employer, be entitled to enrolment in a pension scheme with a contribution from the employer.

KiKi

Unless you fulfil the criteria for self employment as determined by HMRC, you can't 'choose' to be self employed anyway.

There really isn't anything complicated about having two jobs at all. You have one tax code that applies regardless of how many jobs you have, and HMRC do it all for you. All you have to do is tick a box on the P46 form.

InsideInsurance

Beta_Block_Party wrote: »

the 'flexibility' of being released from their employ seems attractive

Just because you are not an employee does not give you flexibility!

You would operate under a B2B contract rather than an employment contract. B2B contracts are less regulated compared to employment and it can certainly require guarantees of attendance, notice periods for voluntary termination but also "penalty" clauses for failing to meet the requirements.

That said both B2B and employment contracts can give flexibility if they are worded correctly - just dont make the mistake in thinking that being a contractor automatically gives you more flexibility

tigeress289

Stay an employee, the benefits are not enough to go self employed. Security is the key word and as the same company, put it out of your head. Short and sweet.

InsideInsurance

Security depends on how long you have been there... if you started after the law changed then you have to be there 2 years before you have any more security than a contractor.

So the contractor next to me has 4 weeks notice and is earning 3 times what the guy next to him is who started the same day and also has 4 weeks notice.

Now, "do we need him still" will come up more often as he is on a 3 month renewable contract -v- the perm guy who possibly has bi-annual performance reviews but in that 3 months he will have earned more take home money than the perm on the 6 monthly review cycle.

Really have to ask who truly has the better security

Mistral001

It is generous of the employer to offer the OP two days work part-time as far as I can see. So perhaps you should accept on their terms and not mess them about by introducing your own terms re self-employment. However that will depend on your assessment fo how valuable you think you will be to them.

As others have said no problem having two jobs. Very sttraight-forward. All the tax and admin. is taken care for you by the firm. Unless you are getting a much higher hourly rate of pay going self-employed to cover the admin hassle and holidays you will not get etc not worth considering self-employment in my view. It depends on the type of business you are in as to how much higher that hourly rate needs to be, but it is more than a few %.

One other thing. Contract workers will be treated as a service the firm avails of and thus it is quite commn for them to be treated a lot differentlty from staff members. Training courses and attending staff meetings and many things you take for granted as a staff member might not be offered to a self-employed contract workers.