Self employed teacher

pioneer22

Hello,

My wife is currently being paid via an Umbrella/payroll company, she works for a teaching agency.

The teaching agency are happy for her to invoice directly so we have some questions:

Doess she need an accountant?
Does she need to be VAT registered?
Does the personal allowance count if you are a limited company?

And is there any thing else we might need to be aware of.

TheCyclingProgrammer

Given your questions, I'd say the answer to the first one is a resounding yes.

VAT registration - depends if she exceeds the VAT threshold or if there is a good reason for her to register voluntarily.

Personal allowance is still going to apply when she takes earnings from the company, either as a salary, dividends or both. If she operates through a Ltd company she will have to consider the IR35 legislation.

If you go down the self employed route then you should double check the agency are happy for her to bill this way - I'd be surprised if the agency would be willing to take her on as self employed as they expose themselves to the risk of HMRC deeming your wife to actually be in disguised employment and footing the bill for unpaid NIC. Most agencies require contractors to operate through an intermediary such as their own Ltd company or an umbrella for this reason.

chrismac1

There is no legal requirement to use an accountant, but it may be wise to have one in the first year at the very least.

The VAT Act 1994, Schedule 9, Group 6 provides exemption for the provision of education, vocational training and closely related goods and services. However, your wife's services are not exempt because she is invoicing via her company. They would be exempt if she was a sole trader. So they are at 20% VAT.

Once her sales in any 12-month period exceed £82k she MUST register. Below that she MAY register and in my view it is probably a no-brainer that she should do so immediately, so long as her customers are all VAT-registered.

The reason for this is her flat rate of VAT would be 12%. In the flat rate scheme, the company will add 20% of VAT on to her services and get paid this, and she will hand over 12% of the total to HMRC. This is a nice little earner and some of my better paid clients make nearly £10k per year profit on VAT.

The CP above is correct, IR35 is probably a very real risk especially if most of her end customers are in the public sector. So she should get her contracts reviewed legally for this, pay for tax enquiry insurance and take suitable countermeasures to reduce this risk unless her earnings from this are going to be below the HMRC radar screen - say under £20k per year.

She should pay herself £10,600 per year salary from her company to use up her personal allowance and secure a year's State Pension. She can then take out dividends for the remaining profit after tax in the company. If she has other income in the 2014-15 tax year, this may not apply in 14-15 but then if it is her sole source of income from 2015-16 a salary of £11,000 will be optimal.

Finally, she should do some calculations on whether her take-home pay (after extra accountancy fees and VAT profit, less lower agency admin. fees) will be higher or lower under this new arrangement. If it will be by a decent margin, then go for it. If it won't make much difference then no reason to make these changes.

Jimmithecat

She will be an employee of the teaching agency and not the school so I am surprised they are happy for her to invoice them and treat her as self employed.
If she registers with the agency to be paid directly it means she will be paying national insurance but not tax - until the end of the year when if she earns over her personal threshold she will have a tax bill.
She can offset travel expenses, printer ink & stationary that she uses in the course of her job.
The advantage of going through an accountant for the first year is that they will sort all of this out for you.

pioneer22

Thanks for the advice, local accountant it is!

She gets around 150 a day so is going to be doing 3-4 days a week. So will probably earn under 20k with the allowance and expenses I would imagine her taxable income to be around 5 thousand I expect.

ollylee

... you may be able to do this even cheaper. there's online accountancy firms that offer this kind of vanilla accountancy service for not much per month. may be worth a little google'ling before signing up (to anything). best wishes

Cook_County

You could try KPMG as they now specialise in small business too.