Self employed

Greenwellies_2

Hi all,

I've been self employed for 18 months now. 
I agreed to work for a small company as a self employed member of 'staff'. 
I get paid a daily rate, regardless of hours worked, which I invoice for, so, if I work 20 days a month, I invoice for 20 days.

I really like what I am doing. I had to buy my own materials, equipment and tools, I don't get paid by the paying customer for my work so when I buy anything,  it's eating into my 'wage'.
I've completed my self assessment and after I have declared my expenses,  I only earned £6000. 

I work 5/6 days a week, 10+ hours a day. After expenses I earned about £20 a day. ... take off the tax / NI bill and it is much lower

How do self employed people manage? 
What am I doing wrong? 

comeandgo

Your daily rate is set too low, you need to look at what your materials cost you, your travel expenses, your insurances , what you would expect to be paid for your knowledge and experience, what you would like to be paid per hour and set your daily rate accordingly. 

FlorayG

You're not charging a high enough hourly rate obviously. You need to work out how much you need to charge in order to earn a reasonable living and tell the company that's your 2025 rate. You don't say what your rate is but self-employed usually charge a minimum of £20 an hour (that's labour only, not including materials) and a lot more if it's skilled work
Also, do you do other work elsewhere when this company doesn't have work for you?

FlorayG

Daily rate for any skilled workman/woman around here is £150
What actual work are you doing? Is it skilled?
Also, the company or the customer should pay for materials unless they are exactly the same for every job otherwise there's no way you can work out how much you are actually earning for your labour if every job needs different expense on your part. You should include anything you have to buy separately in your invoice to the company

DullGreyGuy

Greenwellies_2 said:

I've been self employed for 18 months now. 
I agreed to work for a small company as a self employed member of 'staff'. 
I get paid a daily rate, regardless of hours worked, which I invoice for, so, if I work 20 days a month, I invoice for 20 days.

I really like what I am doing. I had to buy my own materials, equipment and tools, I don't get paid by the paying customer for my work so when I buy anything,  it's eating into my 'wage'.
I've completed my self assessment and after I have declared my expenses,  I only earned £6000. 

I work 5/6 days a week, 10+ hours a day. After expenses I earned about £20 a day. ... take off the tax / NI bill and it is much lower

How do self employed people manage? 
What am I doing wrong? 

Generally you would think of tools/equipment and materials/consumables separately (CapEx -v- OpEx) as the former are one off expenditures that will last a long time so you'd consider a fraction of their cost -v- the other which is routine costs and need to be covered in full. 

Inevitably when you first start trading you have a load of stuff to buy that heavily dents year one results (if doing cash accounting) or cashflow (if doing accrual accounting). It's the pain of setting up and why those doing bigger businesses look for seed capital to help with those costs.

What is your actual day rate? How much are you spending on materials/consumables? Have you checked your contract on if you can bill your client for the materials/consumables?

Ultimately how we cope is by ensuring we are charging an appropriate day rate considering the effort required, risk assumed, expenses we'll incur etc. Ideally we negotiate that materials can be expensed to the client and so we just carry the cost of CapEx which is sensible

Grumpy_chap

Greenwellies_2 said:

Hi all,

I've been self employed for 18 months now. 
I agreed to work for a small company as a self employed member of 'staff'. 
I get paid a daily rate, regardless of hours worked, which I invoice for, so, if I work 20 days a month, I invoice for 20 days.

I really like what I am doing. I had to buy my own materials, equipment and tools, I don't get paid by the paying customer for my work so when I buy anything,  it's eating into my 'wage'.
I've completed my self assessment and after I have declared my expenses,  I only earned £6000. 

I work 5/6 days a week, 10+ hours a day. After expenses I earned about £20 a day. ... take off the tax / NI bill and it is much lower

How do self employed people manage? 
What am I doing wrong? 

If you only earned £6k, how come there is a tax / NI liability?

To assess this going forwards, you need to understand your day rate and how it compares to simply being staff in a similar role.
I assume you know, or can find out, what salary range a staff job would offer and then the resultant take home.
You then need to work out a day rate that multiplies up to equal or better that staff take home after considering expenses, tools, holiday time, sickness, NI and such like. 
Your annual income on a day rate needs to be higher than staff equivalent.

It is difficult to comment in more detail as there is limited information in your post.

On-the-coast

A few questions for you to think about:
How much tax & NI are you paying on 6000 profit? (Very little to none I hope)
How much is your employer charging the customers for your services? (It needs to be a lot more than you earn otherwise this is a completely unviable business. It’s already completely unviable for you - unless you had a lot of start-up costs - but if there’s a big gap you have scope for increasing your rates.   Something has to give.  You’d be taking home £80/day after taxes on those hours in a minimum wage job. 

Marcon

Greenwellies_2 said:

Hi all,

I've been self employed for 18 months now. 
I agreed to work for a small company as a self employed member of 'staff'. 
I get paid a daily rate, regardless of hours worked, which I invoice for, so, if I work 20 days a month, I invoice for 20 days.

I really like what I am doing. I had to buy my own materials, equipment and tools, I don't get paid by the paying customer for my work so when I buy anything,  it's eating into my 'wage'.
I've completed my self assessment and after I have declared my expenses,  I only earned £6000. 

I work 5/6 days a week, 10+ hours a day. After expenses I earned about £20 a day. ... take off the tax / NI bill and it is much lower

1. How do self employed people manage? 
2. What am I doing wrong? 

1. By being businesslike and commercially minded - and doing their 'homework' properly before grabbing the first thing that comes along because they might never be offered anything else (very common when first starting out as self employed!). Simply liking what you do doesn't pay the bills, as you've found to your cost.
2. If you can't work that out, are you sure self employment is for you? That's not meant unkindly, but you do sound totally ill-prepared for being self employed rather than having the comfort of being an employee. Do you, for example, have a business plan for now/the short term/longer term?

Think about the following:

• what are the terms of your contract with this small company - you do have one, I trust...?
• why did you agree to work for a daily rate which barely covers your costs, never mind making a decent profit?
• what are the realistic prospects of either changing the terms of this agreement to one which will give you a reasonable income (think hourly rate rather than daily if you are routinely working 10 hour days - and adding a clause to cover essential materials, especially consumables), or simply ending it and getting clients who pay much better than this one?
• will clients pay you the sort of money you'd need to earn to be at least equal to the salary you'd receive as an employee, taking into account the fact you don't get paid holidays, sick pay, pension contributions...in other words, is your foray into self employment doomed to fail, at least financially, or can you breath new life into it by taking a much more commercial and realistic stance?

As others have said, tax and NI are payable on profits from self employment, not turnover. Are you sure you are doing your financial reporting correctly and claiming all the available legitimate reliefs?

DullGreyGuy

On-the-coast said:

How much is your employer charging the customers for your services? (It needs to be a lot more than you earn otherwise this is a completely unviable business. 

Not everyone knows will know what the ultimate customer is paying towards a contractors own rate, particularly if you are more of a back office type function (appreciate in this case the OP appears to be more practical) or if the client charges fixed price or a blended rate for a range of people working on a job

A company doesn't have to make profit on absolutely everything that it does when looked at in isolation, you get loss leaders, blended rates etc which may in isolation look poor value but as part of the bigger picture is justified elsewhere. Similarly you'll rework to do that will receive no payment for but still has to be done. 

We charge a client £100, most the work is done by our own staff that costs us £50, at times there are unpredicted surges and so we get in contractors who cost us £110. Technically, in isolation, its bad business to buy for £110 and sell for £100 but we must hit our targets and if during surges we turned customers away or said they'd have to wait longer we wouldn't just lose those sales but likely lose the whole relationship so it does make sense to use them at the macro level. 

Given the OP appears to be working for £2/hr (though likely not and they've factored in setup costs) they could be racking it in because they are charging the standard commercial rate for whatever the OP does or they may be giving their time away as a freebie because customers like getting something for free and the rate is so low is should be absorbable and customers will think its a much more valuable freebie than it really is. 

Greenwellies_2

Thank you all for your replies. 
Having had a stalker here years back, I am cautious about what I post. 

Simply,  my "boss's" business model is to have self employed staff and that's how I am at this point.  
I tried to negotiate an increase and I was told the accountant said they couldn't afford it. 

I love my job, I don't want to go back to my old work. But what I do has to be done in a particular environment;  they have the premises; I can't just set up and go it alone. I feel that this is an offset for my low daily rate, (that I don't get charged for using the premises. (I don't get a share of profits, nor payment from end customer)).

My start up costs are high and that prevented me really putting something aside.

I am paying £2.3k in tax and NI. I can't afford it.

I guess my original question should have been:
Am I  doing something wrong on my self assessment?

Followed by:
If there were websites for support out there.

And then:
With such low income, no savings and no pension in place, I know I am not in a good place, but where to start. 

Marcon

Greenwellies_2 said:

My start up costs are high and that prevented me really putting something aside.

1. I am paying £2.3k in tax and NI. I can't afford it.

I guess my original question should have been:
2. Am I  doing something wrong on my self assessment?

Followed by:
If there were websites for support out there.

And then:
With such low income, no savings and no pension in place, I know I am not in a good place, but where to start. 

1. That suggests you have other taxable income. Is that the case?
2. No idea - not enough information - but if you are paying NI when your profits are only £6K, it sounds as if you are.
3. Yes, lots - and your local council may run short courses, often free or heavily subsidised, for those setting up in business for themselves, or running their own business. Have a look at https://www.gov.uk/browse/business and https://www.litrg.org.uk/working/self-employment and https://www.gov.uk/business-support-service
4. An accountant would be a pretty good idea, to ensure you are claiming all the tax breaks open to you and to check you've got everything off on the correct footing. From what little you've said, something sounds well off the mark. 

Greenwellies_2 said:

Thank you all for your replies. 
Having had a stalker here years back, I am cautious about what I post. 

Simply,  my "boss's" business model is to have self employed staff and that's how I am at this point.  
I tried to negotiate an increase and I was told the accountant said they couldn't afford it. 

I love my job, I don't want to go back to my old work. But what I do has to be done in a particular environment;  they have the premises; I can't just set up and go it alone. I feel that this is an offset for my low daily rate, (that I don't get charged for using the premises. (I don't get a share of profits, nor payment from end customer)).

My start up costs are high and that prevented me really putting something aside.

I am paying £2.3k in tax and NI. I can't afford it.

Some people certainly do over-share and you're right to be cautious, but obviously replies can only be based on the information you give.

It's all very well for the accountant to say the business can't afford to pay you more, but you can't afford to live on what you are earning. How valuable are you to them? Until you have the confidence to negotiate on equal terms, and tamely continue to work for too little, they have no incentive to change the status quo. You're going to have to take charge of doing that. You're just trying to fool yourself if you think not being charged for using their premises is somehow justification for being underpaid for what you are bringing to the business.

If you can't or won't face commercial reality (ie you need to earn enough to live), then although you may not want to go back to being an employee, what's the alternative? At present you have all your eggs in one basket, no business plan, and no fall back position if your current single 'customer' goes under. Maybe time to do some serious marketing/exploring how you can increase your options (and your income)?