I'm considering becoming self employed.

[Rhythm Thief]

Ok, it's not strictly a cafe topic, but does anyone have any advice? I'm going to see an accountant next week, but would appreciate any thoughts. I'd still be working for the same bloke on an ad hoc basis, but instead of him paying the agency £14 an hour and me getting £9.50, I'd bill him directly at perhaps £12 an hour via my own limited company. I could write off all sorts of things against tax, claim business mileage for my journey to work and would generally be better off. At least, according to one of the other drivers who already works this way. Any thoughts?

 

[Hilldodger]

The tax man won't like you becoming self employed and only working for one person - he'll think you're both avoiding paying tax. You'll get away with it if you do some work for other people.

I'm having the same problem being self employed and working full time for Cyclemagic

 

[dan_bo]

Charge him more than £12 an hour. Most of the rest of it can be summed up in one, very important, phrase:

Cash flow.

 

[Rhythm Thief]

The tax man won't like you becoming self employed and only working for one person - he'll think you're both avoiding paying tax. You'll get away with it if you do some work for other people.

I'm having the same problem being self employed and working full time for Cyclemagic

I think (but, crucially, don't know) that I can work for up to two years for the same chap. But if not, I can put in a few weeks with some other clients.

 

[phil_hg_uk]

I love been self employed its great I wish I had done it a long time before I did so go for it.

 

[Rhythm Thief]

Oh the wonderful world of Self Assessments, P11D's etc....

I would have thought in your case its definitely worth it, you can write off all your Yorkie Bars if nowt else

My god ... I'll save a fortune.

 

[SavageHoutkop]

ask what happens to your pension...

 

[I am Spartacus]

You may have an issue,
and that issue is

IR35

bad karma

 

[wafflycat]

Been self-employed most of my working life, as has MrWC.

http://www.hmrc.gov.uk/selfemployed/

Be careful. HMRC does not actually like the self-employed at all.

Plus points:-

Own boss
You decide when you work (subject to the various contracts you get)]
You can leave easily

Downsides:-

No sick pay
No holiday pay
No employer's pension contributions
No guarantee of income each month.
If you take holiday, you aren't earning.
Time taken to look for new contracts can be time when you're not earning, which means no money.
Be prepared to make provision for tax etc.

 

[accountantpete]

Basically there are tax laws set up to prevent this (IR 35) but these depend on the individual circumstances and whether the Revenue ask any questions - the accountant will be able to advise.

Setting up and maintaining a Limited Company is more expensive than being self-employed but provided your accountant sets the company up paying you a basic salary up to the level of your personal allowances and then the rest by way of dividend the tax savings will more than cover this.

 

[Rhythm Thief]

ask what happens to your pension...

What pension?

 

[Rhythm Thief]

Basically there are tax laws set up to prevent this (IR 35) but these depend on the individual circumstances and whether the Revenue ask any questions - the accountant will be able to advise.

Setting up and maintaining a Limited Company is more expensive than being self-employed but provided your accountant pays you a basic salary up to the level of your personal allowances and then pays the rest by way of dividend the tax savings will more than cover this.

Ah, now I see how you got your username ...

Thanks for the advice everyone, some useful stuff there. Especially accountantpete and Waffly.

 

[Hacienda71]

You could be a soletrader allowing you to avoid nasty things such as tax on cars etc (not that on a cycling forum any of us ever drive) Then when you have traded for a while you could set up a ltd co that would buy the business off you the sole trader by way of a directors loan (ie you lend the company the hypothetical money) you could then draw back money from the directors loan account. You don't pay tax on this money so it is tax free!

In all seriousness though you will need to speak to an accountant who will guide you through the options. A good one will give you various alternatives and examples of how you will benefit for each scenario.

 

[snakehips]

The tax man won't like you becoming self employed and only working for one person

Interesting point.
I know somebody who had that problem and had to accept a permanent position from the employer. But I also know somebody who worked exclusively for BT for about 15 years and billed them through his own limited company.

???

 

[Norm]

There's a lot of things that the tax-man uses to decide between a contract of service (employed) and a contract for services (self-employed), including hours worked, number of principles, who provides the tools, who pays for insurance and takes responsibility if things go wrong, whether it is custom and practice in that industry etc.

It became so prevalent in construction that a whole new industry sprang up around it (check out the CIS regulations if you can't sleep at night) and it is happening in many other places too.

The most important thing from the tax-man's perspective is whether they find out about the individual case.

*Note, "tax-man" is not intended to be gender specific. Whilst I did contemplate using the term "tax-thing", I thought I'd keep my personal opinions out of the thread.