Freelance Taxation

ZacharyJohn

Hi,

My brother recently started a new job last month as some sort of salesperson but instead of being on the company's payroll, he invoices them on a monthly basis so I guess he's technically a freelancer at the moment...

Of course now he'll be responsible for accounting for his own tax at the end of the financial year and so I believe this means he'll be taxed on profit instead of income and can include various expenses (a percentage of household bills as he works from home for example) to reduce his overall taxable profit.

Is this correct? And if so, would it not be beneficial in a tax sense for most people to work 'freelance' and not PAYE to include any expenses (travel to and from work for example) on their P&L for the year in order to reduce the tax they pay?

Thanks!

Grumpy_chap

Your brother needs to get an accountant.

Pennywise

The rules re expenses etc are actually pretty similar whether employed or self employed.
Even if self employed, his "normal" commute, i.e. home to the firms' offices aren't allowable if it's a regular journey, i.e. habitual.  Of course, travel to customers' premises is allowable, but it would be allowable if he was an employee too.
Yes, he can claim a proportion of heating/utilities etc for working from home as self employed, but he's incurring more costs by working at home in the first place, so again, not really as much benefit as people think.
Freelance hourly rates etc are usually higher to compensate for the extra costs/risks incurred by the freelancer, i.e. own equipment, own insurance, no sick pay, no holiday pay, no redundancy pay, etc etc.
As said above, he needs to get an accountant sooner rather than later so that he can properly understand the pros and cons and get things planned properly.  He could miss out on some tax breaks/opportunities if he ploughs on and leaves getting an accountant until after the year end, when opportunities may have been lost.

Jeremy535897

You cannot choose whether a contract is a contract of service (employee) or a contract for services (self employed). It is a question of fact, although there are grey areas. See https://www.gov.uk/employment-status/selfemployed-contractor