Self employment benefits for agency care worker???

KCarter90

Hi, 

I recently began work as a care worker through an agency & even more recently joined a second agency to better ensure that i am able to get my required hours. 

Whilst at work i was speaking to a fellow agency worker who like me works for more than one agency, he in fact works for 5 different agencies. So this led me to ask how that would affect his tax, my assumption being that working for 5 agencies would surely have an impact on the amount of tax he has to pay. 

& this is where my curiosity is peaked.... He briefly outlined to me that he was self employed & he even showed me a copy of his payslip. Considering we both work for the same agency his Net Pay was significantly higher than mine for the same amount of hours. I know that self employed workers have to 'sort' their own taxes, so i figured that it would pretty much even out to being taxed the same as me but he explained that this was not the case and gave me his earnings for last year vs the taxes he had to pay. I can't remember the figures but i do remember thinking at the time that his taxes were definitely significantly lower then what i would pay for a years work. 

I am now considering becoming self employed for obvious reasons. In brief, he advised me i should meet with an accountant who would send off all the relevant documents, then once I've received these documents i would then need to speak with a bank to set up an account. 

I'm well organised financially and it doesn't phase me that i would need to do my own tax returns etc. 

So........ I'm basically hoping for someone on here to give me some more details on this. My colleague did give me some details but i would prefer to know exactly how this all works?

Why would i seemingly be paying less tax as a self employed worker?

How straight forward is it to set up a bank account specifically for this? A business account?

I'd really appreciate any assistance on this 

Thanks in advance, 

Kyle. 

oldbikebloke

as you yourself have mentioned, if you seriously want to progress this you MUST talk to an accountant as you have no clue want you can and cannot claim as expenses and will never know if you got right until HMRC select your tax return for review , which may be never or next year, you won't know til it happens, at which point if you have got it wrong, you will be shown the book and a list of fines.

the self employed pay "less" tax because they have lower taxable income as their taxable pay is after expenses have been deducted from it, leaving less profit to be taxed. Knowing what is a valid expense is where you will get it wrong, particularly if you are not genuinely self employed in the first place.

With all due respect to your profession, I would not take tax advice from a fellow care worker, I'd ask an accountant!

Dazed_and_C0nfused

As these agencies have presumably employed you what guarantee do you have that they will be happy to give you work on a self employed basis?

If self employment was genuinely appropriate presumably they would have taken you on on that basis in the first place.

And are you happy giving up your rights as an employee to potentially save some tax?

Kim_kim

Don’t forget you will loose paid annual leave - that’s worth about an extra 12%

Plus you’ll have to pay the accountant.
Do you get sick pay, maternity pay?  You’ll loose that.  

KCarter90

oldbikebloke said:

as you yourself have mentioned, if you seriously want to progress this you MUST talk to an accountant as you have no clue want you can and cannot claim as expenses and will never know if you got right until HMRC select your tax return for review , which may be never or next year, you won't know til it happens, at which point if you have got it wrong, you will be shown the book and a list of fines.

the self employed pay "less" tax because they have lower taxable income as their taxable pay is after expenses have been deducted from it, leaving less profit to be taxed. Knowing what is a valid expense is where you will get it wrong, particularly if you are not genuinely self employed in the first place.

With all due respect to your profession, I would not take tax advice from a fellow care worker, I'd ask an accountant!

100% i will be speaking with an accountant & i'm assuming this will clarify alot. 

liz_bartun

With the IR35 restrictions coming in to play for all except small companies (as defined by the Companies Act) in April, I would think it highly unlikely a care worker could be engaged outside of IR35. Your friend will likely soon find himself employed too. It's a non-starter

laticsforlife

I'm more intrigued as to how one of you is s/e and the other an employee - yet both do the same thing, albeit you for 2 and they for 5 agencies.
The decision to be s/e or e/ee is not yours to make, it's based on the facts of engagement.  I can't see how you 2 are treated differently, clearly the business engaging you is doing it wrong to have a mix of people and as liz_bartun says IR35 will hopefully level the playing field.

Your friend is claiming spurious expenses to pay less tax, clearly.
I'd guess their accountant said something like;
Uniform cleaning, £520
Travel, £1,040
Home as office, £520
Telephone, £250
and so on...not that these are necessarily true business expenses, but so long as they don't go mad, nobody is likely to spot it. You see adverts all the time offering to do your accounts for £100 and save you £1,000, its a cottage (fraud) industry.  Back of a fag packet accounts as I like to call them, as drawn up by friends talking down the pub!

One could argue that your friend paying less Income tax doesn't much hurt the country much as they have more money to spend in shops where UK VAT is added, and we now get to keep it, post Brexit (well once we stop paying the EU), and the extra profit in those shops funds jobs, PAYE and Corporation Tax (unless they are offshore tax dodgers, Amazon/Tesco/Vodafone you know who you are, Doh!)

But that's a very simplistic approach, I know there are many more factors in play, and an honest taxpayer is far more valuable to the country than a thief.

HMRC has in the past targeted accountants on a one to many approach, to certain accountants (in the very loosest description of accountant, doing a massive dis-service to a proper qualified accountant), saying to them, stop doing what you're doing, put right the past maybe 3 years for all your clients (usually on a 10% of turnover figure) and we won't go after your 1,000 clients (and nor will we prosecute you for fraud), and only charge a low penalty - it works well as it brings 1,000's of people into being fully honest taxpayers without the huge cost of opening tax investigations into those people.  It leaves Investigators with time to chase after the truly worse fraudsters.  I don't know if they still do this, but they should.