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Private or PAYE??

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mac123
mac123 Posts: 247 Forumite
Part of the Furniture 100 Posts Combo Breaker
Hi

I have registered with a few new agencies and they ask if I'm private or PAYE?? What are the differences and what are the benefits of being private or PAYE??

Thanks

Comments

  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    10,000 Posts Combo Breaker
    It sounds like you're looking for contract work of some kind. If so, then the agencies want to know if you are classed as self-employed, working for yourself, or if you have set up a company and pay yourself under PAYE tax.

    Google for IR35 to see the issues this presents. Or give us some more details of what you have registered to do, what type of work you hope to get and what kind of position e.g. casual work, contract work, part-time, full-time etc
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • Lawbag_2
    Lawbag_2 Posts: 361 Forumite
    PAYE means you pay your tax and NI contributions as source. I.e. your liability to the Govt. for Tax and NI is done by your employer.

    PAYE
    Plus Points - your tax paperwork is done for you, and money taken out of your wages.

    Negative Points - you are still liable for these amounts deducted if your agency defaults on its payments to the Inland Revenue, by having several P60s/Jobs within the same tax year you will most likely get a tax form to fill in anyway

    PRIVATE
    Plus Points - you can claim back expenses etc.. incurred for "work" and claim it as a business expense, thereby reducing your tax paid.

    Negative Points - you really need an accountant to guide you through what can and can't be claimed.


    Did I miss anything? or do you need more info?
    "See you on the Other Side"
  • dag_2
    dag_2 Posts: 793 Forumite
    It depends on how much you're expecting to earn. If you think your earnings are likely to be low, and that you'll need to claim housing benefit to pay your rent - then I'd very strongly recommend against being self-employed. That's because it will involve reams and reams of paperwork. The local authorities need much more information to be able to calculate housing benefit than the inland revenue need to calculate income tax.

    But if you don't need housing benefit - then I'd say that self-employed is generally better. Assuming you can't claim for any expenses, the amount of tax you'd pay either way will be the same - however, the national insurance on a given amount of taxable pay is usually lower for a self-employed person than for an employed person working for one employer - however, it's sometimes higher than an employed person who works for several employers.

    Another plus point of self-employed is that the tax is paid much later - so you can profit on the interest. This is especially useful if you have a flexible mortgage or loan, or credit card debts to pay.

    This does not constitute legal advice.
    :p
  • WHA
    WHA Posts: 1,359 Forumite
    Are you using agencies to "find" work - and you'll contract directly with the employer yourself, then you do have choices about self employment or employment under PAYE.

    However, if you will be working for the agency who in turn are paid by the end employer, then you don't have the self employment option as such agencies must operate PAYE unless you have your own limited company. So in that situation, your choice is employed under PAYE by the agency, or employed under PAYE by your own limited company which is not self employment for tax and employment legislation.
  • mac123
    mac123 Posts: 247 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    The agencies will be finding me the work then paying me - they will then be paid by the company. Some contractors use companies such as FileTravel and First Contact who manage their tax and expenses.

    What are the benefits of this, or would it be better to start as a limited company myself????

    Cheers
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