Clueless about self employment. (Not your typical self-employment)

jod5069

Hello I am an 18 year old student post-college and I’ve recently acquired a job in which the company I work for want me to register as self employed because due to the nature of the work which is unpredictable, they may not always have work for me to do.

I don’t really mind having to register as self employed, I just have a number of queries.

I was thinking of setting up a bank account solely for my ‘wages’ – I just want to keep it separate from my current account to make it easier when I fill out my self-assessment. Would HMRC be happy with this or am I required to declare what’s in my current account? Bear in mind that whatever is in my current account has been my own savings, not earnings.

I was also thinking of making another account where I could sift off about 30% of my earnings into this account for tax purposes. I saw on MSE “For every £100 you make, £30 isn’t yours” so every month I get wages, I can transfer 30% over and then I won’t be tempted to spend it and it’ll make it easier to pay tax when I need to. (I might even do 40% so I’ll have a little bonus at the end of the year. Haha!) Again, does this sound like a good idea and is it likely that HMRC would be happy with this?

I doubt my earnings will be excessively large so I don’t think a business bank account would be necessary as the only transactions that take place will be payment from the company and myself transferring my earnings/profit into my current account.

For bookkeeping purposes, I will probably use online banking to keep a track of payments made from the company etc. I am required to do my own invoices. Will this be all the information I need?

I am also hoping to start university in September. Given that I’m a dependent student (dependent on Parents etc) would my income have any impact on my loan/grants for the next year? If so, how can I calculate what is the maximum amount I can earn before it starts to affect my loan/grant?

If I have any queries, who should I contact? Would HMRC be likely to offer me advice with regards to being self employed or are their help-lines only to help people fill out self-assessment forms?

Would it be worthwhile getting an accountant for the first year? I doubt my income would be big enough to cover the cost of their services. I don’t really want to do that but I fear I may be out of my depth when it comes to filling out the self assessment forms.

Basically, in short terms, all I will be doing is carrying out the work and duties I am asked to do, the company will pay me and I want to take what I am entitled to (I think two thirds?) and transfer it into my own current account for my own personal use to spend on the things a teenager normally spends it on like clothes etc. I’m just unsure about how much National Insurance I’ll have to pay, how much tax and how much other things?

I’d appreciate simplified answers as I really am a very inexperienced person to the world of business and self employment!

paddyrg

Before we get too ahead of ourselves, understand it isn't you or the company that decides of you can be self employed in a role-many roles will be deemed employed with all the tax liabilities that go with that, regardless of whatever you say you are. It may be better for the company to employ you on a zero hours contact instead.

As for accounts, hmrc won't care if you have 1, 3 or 5 accounts, and you don't pay tax on savings, just income (so interest, yes, capital, no)

Doubt in one summer you'll earn enough to hit the tax thresholds, so may see more of that 40% than you think, which will be a result It's also probably not going to make a huge difference to your grant/loan etc positron in reality.

Carer

I suggest you have a read through this:

http://www.hmrc.gov.uk/working/intro/empstatus.htm

It will tell you whether you can be classed as self-employed and lots of other useful stuff.

podperson

HMRC won't be interested in your savings or any other money that doesn't come from the self employment.

While it's a good idea in principle to put some money aside for tax then bare in mind that when you're self employed you do still have your tax allowance for the year - if you're only working over the summer then you may not reach that and so won't have to pay tax on it. Check on the HMRC website regarding NI contributions, you may need to pay a few pounds a week for this. You can call them if you have any queries - they tend to be very helpful with new sole traders/businesses. You can also check with them if you need help on your self assessment but for what you're doing it should be very straightforward and definetely don't pay an accountant to do it!

Your earnings won't affect your student loan entitlements at all.