Working out my taxes as self employed

Fedcas65

Hi,

I've made the following calculations on an example income of 110000 pounds per year, can anyone help me out if I considered everything?

It surprises me that there aren't official calculators for self-employed people online, or maybe there are but with weird names and I don't know if I can trust them...

Below you find the screenshot of my calculations and my questions in red, I'm still employed but I'm considering to be self employed because I'm searching for a job and I can't be very selective at this time...

eskbanker

Not sure what you mean by 'mandatory state pension contribution' - the only way anyone builds up state pension entitlement is through National Insurance contributions (or credits), so it's not one or the other but the same thing!

Looks like your spreadsheet has added your personal tax allowance to your income, which isn't how it works, so that more than cancels out the effect of mistakenly including the £10,800....

Edit: https://www.gov.uk/self-assessment-tax-calculator seems a reasonably intuitive source for this and gives, for a monthly profit of £9,166, NICs of £3,456.44 and tax of £33,427.20.

Ayr_Rage

@Fedcas65 5 minutes ago you posted saying you were unfairly made redundant!

https://forums.moneysavingexpert.com/discussion/6646813/unfair-dismissal-with-redundancy-and-unemployment-insurance#latest

Fedcas65

Ayr_Rage said:

@Fedcas65 5 minutes ago you posted saying you were unfairly made redundant!

https://forums.moneysavingexpert.com/discussion/6646813/unfair-dismissal-with-redundancy-and-unemployment-insurance#latest

Correct, but I'm exploring the self-employed option because as an employee is a desert in my field...
The situation is getting difficult to the point that I'll need to sell the just purchased property...

Fedcas65

eskbanker said:

Not sure what you mean by 'mandatory state pension contribution' - the only way anyone builds up state pension entitlement is through National Insurance contributions (or credits), so it's not one or the other but the same thing!

Looks like your spreadsheet has added your personal tax allowance to your income, which isn't how it works, so that more than cancels out the effect of mistakenly including the £10,800....

Edit: https://www.gov.uk/self-assessment-tax-calculator seems a reasonably intuitive source for this and gives, for a monthly profit of £9,166, NICs of £3,456.44 and tax of £33,427.20.

Thank you, I wasn't expecting to be that simple.
So, self-employed don't need to contribute 900 monthly, we just need to consider the class 4 NIC contributions?

Which is quite less, it's 3300 vs 10800...

So, in essence self-employed people may generally get more cash, assuming they don't care about a private pension contribution.

Question, if the NIC contribution is less as self-employed, is it correct to think that I'll be paid less one day? Atm, it's ~250 per week or so, but that's for whom has paid 900 pounds monthly as far as I know, as being employed.

eskbanker

Fedcas65 said:

Question, if the NIC contribution is less as self-employed, is it correct to think that I'll be paid less one day? Atm, it's ~250 per week or so, but that's for whom has paid 900 pounds monthly as far as I know, as being employed.

NI years are either full or not, based on the number of weeks/months contributed, regardless of the numerical value, so those paying thousands will get the same increment added to state pension entitlement as those paying hundreds.

Woodstok2000

Also, don't forget your personal allowance will be less than £12,570 if you're earning over £100,000 (unless you can reduce the salary somehow, e.g through pension contributions). The personal allowance goes down by £1 for every £2 you earn over £100k, so with no adjustments a salaray of £110,000 means a tax free allowance of £7,570.

Fedcas65

eskbanker said:

Fedcas65 said:

Question, if the NIC contribution is less as self-employed, is it correct to think that I'll be paid less one day? Atm, it's ~250 per week or so, but that's for whom has paid 900 pounds monthly as far as I know, as being employed.

NI years are either full or not, based on the number of weeks/months contributed, regardless of the numerical value, so those paying thousands will get the same increment added to state pension entitlement as those paying hundreds.

Oh ok, so it goes with paying or not paying...
Interesting, so basically the amount "saved" with being self-employed could go in the private pension (or in my pocket for further private investments), the numbers quite match my current pension contribution, so it makes sense for me to be self-employed if I take at least 575 per day, but registered how? Shall I open my private limited company or as sole trader?
After a quick search, a private limited company is much better, though I may need to wait a couple of weeks for the story of dividends/PAYE and the VAT.


Thanks for all the info, much appreciated.

Isthisforreal99

With so many questions you would be best seeking professional advice. There is no right or wrong answer and will depend on your personal situation.

eskbanker

Fedcas65 said:
Interesting, so basically the amount "saved" with being self-employed could go in the private pension (or in my pocket for further private investments), the numbers quite match my current pension contribution, so it makes sense for me to be self-employed if I take at least 575 per day, but registered how? Shall I open my private limited company or as sole trader?

After a quick search, a private limited company is much better, though I may need to wait a couple of weeks for the story of dividends/PAYE and the VAT.

As above, there are pros and cons of sole trader versus limited company, and you'll find plenty of articles by searching for those five words, including a simple table at https://www.gov.uk/set-up-business

In terms of comparing employment income with self-employed, pension contributions are indeed an important consideration but there are plenty of others to factor into the evaluation, including holiday pay, sick pay, insurance, accountancy costs, etc, which can and do eat into the apparently substantial variance between headline day rates.

JibberdyDacodo

Isthisforreal99 said:

With so many questions you would be best seeking professional advice. There is no right or wrong answer and will depend on your personal situation.

Fully agree with this.