Self employed or Paye?

Jessy321

Hi all,

I've been offered a job and i wondered how much more i need to be paid for self employed to be the better option. I was offered £13.5 and £18

Any ideas which would be best overall?

thanks
Jessy

Savvy_Sue

the best one would be the legally correct one. Neither you nor your employer have the final say in whether or not you are self-employed or employed: HMRC do. There's an online questionnaire to help you decide here.

Bear in mind that if you are genuinely self-employed, you get no sick pay, no holiday pay and no pension contributions: all benefits of employment.

Jessy321

Sorry, I don't follow with regards to which one is legally correct?

They have offered me two routes if I want to work for them.. either I go on the books at one price or be self employed at another.

Jessy321

Sorry I've read my original question and it's not worded well..


I've been offered a job £13.5 paye or £18 self employed. Just wondering which would be financially better..

Savvy_Sue

I stand by my original answer. I suspect they are trying to pull a fast one: if you are employed they will be obliged to pay you holiday pay, sick pay, and make NI and pension contributions on your behalf, and after two years you'll also have some protection under employment legislation. If you are self-employed you will be responsible for all of these things, and for sorting out your own tax, and can be got rid of immediately, no notice, no appeal.

https://www.tax.service.gov.uk/check-employment-status-for-tax/setup

That takes you direct to the questionnaire - answer it, and you'll discover whether this is genuine self-employment. If it's not, I'd walk away because if they are willing to fudge issues like this, what else are they fudging?

What does the job entail? Regular hours? Regular place of work?

spadoosh

There are rules surrounding tax and employment.

They set out a rough guide to describe whether someone is employed and should be paying PAYE or self employed and doing self assessment.

You might be considered self employed for thigns like:

You are able to pick and choose your hours of work.
You can employ someone to do your role for you.
Or you can bid for contracts from other customers.

You might be considered employed if you

Have set days and times of working.
Are unable to take work on from other companies.

Lets say youre a cleaner and you work for a company. That company could offer you self employed or PAYE routes like yours has. The employed route would mean thigns like tools and equipment priovided, fixed days/times of work, restricted from working elsewhere, holiday pay, sick pay etc. Where as the self employed route would mean sourcing your own tools and equipment, picking times of work to suit your workload, no sick pay and holiday pay, self assessments etc.

You need to find out what the company are actually offering. If theyre saying we need xyz done, can you get it done, you might be able to take the slef employed route. If theyre saying we need you here mon-fri 9-5 to do xyz then youre probably going to be employed and as such they would be expected to do PAYE.

Comms69

Your 'self employed' rate needs to be approx. 50% higher than the PAYE rate to cover the incidentals like insurance, as well as holiday, sickness and maternity/paternity leave.

Pennywise

As Savvy has said, it's a matter of fact not choice whether you're employed or self employed.

If you're being given a choice, then there must be other differences, i.e. providing your own tools/equipment, freedom to choose hours, degree of supervision & control, etc. Otherwise the employer is pulling a fast one.

For the self employed route, I'd agree an uplift of at least 50% above the "employed" rate is required to cover the loss of employment benefits/rights and the extra costs you'll incur (plus risks).

Also, if you go self employed, don't "spend" the extra. You should save to cover your unpaid holidays, unpaid sick leave, to make your own pension contributions, and don't forget to save plenty for your tax/NIC. A lot of s/e people splash the cash and then have real problems when they can't/don't work, no money is coming in but the tax/NIC bill is due.

bugslet

Savvy sue's posts are correct IMO.

But ask yourself why would someone want to pay you more unless it was beneficial to themselves? Of course if you went Ltd, you could start taking directors dividends, that might make it worthwhile.

Thought I think the whole directors dividends things is immoral.

Pennywise

bugslet wrote: »

Of course if you went Ltd, you could start taking directors dividends, that might make it worthwhile.

Thought I think the whole directors dividends things is immoral.

There's not much difference anymore due to the extra personal dividend tax.

What was immoral (well actually incompetent) were the tax law changes which made it possible in the first place and that it's taken 20 years to address!

But back to the OP, highly unlikely that the costs/hassle of a limited company would be worth it on those relatively low hourly rates.

System

Pennywise wrote: »

There's not much difference anymore due to the extra personal dividend tax.

What was immoral (well actually incompetent) were the tax law changes which made it possible in the first place and that it's taken 20 years to address!

But back to the OP, highly unlikely that the costs/hassle of a limited company would be worth it on those relatively low hourly rates.

I don't see how 'There's not much difference anymore.....'. Apart from the tax rates being different on the two methods of cash extraction, there is also the obvious difference of no NIC on dividends.