Self Employed or PAYE?

SuperKT

Hi

I have just recieved a new contract to work for the next 10months to a year and they have given me the option to either get paid as a freelancer or to join the payroll (PAYE)


I have never worked as a freelancer before so I am not too sure how easy it would be to do my own taxes, get an accountant ect and most importantly if the time and effort would be worth the money I would save.



Please let me know if anyone could offer any help, it would be more than appreciated.

Best KT

wesleyad

Personally I would go PAYE, it takes out all of the hassle. You might lose out on very marginal expenses.

The disadvantages of going self assessment now would be even if the contract is the 10 months, you will have to do a self assessment for this tax year and the next (as 10 months will push you into next april).

The tax man will look at this years SA and then work out tax as if you would be working at that rate indefinitely. They then charge you this 6 months in advance. So you could find yourself owing 10 months tax for this year and then a further 6 months for half of the next year, which you may not even be eligible for. I assume this is then claimed back or you would need to speak to them to remove it. Either way its hassle that's not needed.

Add on to that all the other things you need to do to comply with freelancing, such as keeping records etc. I cant really see the benefit, unless the expenses make up a lot of money (which I doubt).

Suarez

If the tax due is less than £1000 you won't have to pay on account.

nomunnofun

wesleyad wrote: »

Personally I would go PAYE, it takes out all of the hassle. You might lose out on very marginal expenses.

The disadvantages of going self assessment now would be even if the contract is the 10 months, you will have to do a self assessment for this tax year and the next (as 10 months will push you into next april).

The tax man will look at this years SA and then work out tax as if you would be working at that rate indefinitely. They then charge you this 6 months in advance. So you could find yourself owing 10 months tax for this year and then a further 6 months for half of the next year, which you may not even be eligible for. I assume this is then claimed back or you would need to speak to them to remove it. Either way its hassle that's not needed.

Add on to that all the other things you need to do to comply with freelancing, such as keeping records etc. I cant really see the benefit, unless the expenses make up a lot of money (which I doubt).

Not correct - either you make a claim to reduce the payments on account on the first self assessment or you complete a simple form SA303

http://www.hmrc.gov.uk/sa/forms/sa303.pdf


My main worry would be the staus of self-employment at all. From first indications he/she would very much appear to be an employee.

PlutoinCapricorn

They should not really be giving you a choice: it is the terms and conditions of employment that determine your status in the eyes of HMRC.

Do they decide which days/hours you work? Are you free to take on other clients? If it is full time week after week, month after month then it sounds like a PAYE position.

tuttifruiti20

If you work standard hours then I would just stick to PAYE as it is simpler.

kendall17

It would depend on 2 things for me:

A) Do you use all your holiday?
Do you spend much time off sick?

If the answer is no to both of them, then i'd go down the SE route, simply because your (current) employers would probably pay you more as they dont have to pay you for not being there or employers NIC.

SE is really really simple and you should be able to pick it up easily.

Abhijit

If you are working already in any organization then you have to go as a freelancer otherwise you have to join the payroll.

Finally, It's your choice but you have to decide wisely - Which will be good for you?

comeandgo

I'm with the other surprised people that you are getting a choice. I have seen what the Revenue do to companies who have people who should be employees but are working as self employed.

claret_mike

kendall17 wrote: »

It would depend on 2 things for me:

A) Do you use all your holiday?
Do you spend much time off sick?

If the answer is no to both of them, then i'd go down the SE route, simply because your (current) employers would probably pay you more as they dont have to pay you for not being there or employers NIC.

SE is really really simple and you should be able to pick it up easily.

Equally, you should consider that you may relinquish employment rights such as redundancy pay, the ability to claim if the company goes bust and who knows whether you will remain fit and healthy in the future where you may then not qualify for sick pay. Also pension contributions, you will be responsible for these and no employer contribution (auto enrolment is coming in so this will be a need soon by all employers) and you will be saving your company some NI contributions. Also, what happens if they want to terminate your contract - no employee protection possibly?

For me to lose all these benefits, the rates of pay would have to be substantial - i.e not just the same or an extra few quid a week. I would probably state 50% on my current rate of pay as a minimum.