PAYE vs Self employed

[gtw2856]

Hi

Sorry if this question has already been asked/answered but I can't see it anywhere...

Can someone explain to me if there is any benefit discussing with my employer becoming self-employed and invoicing him for my wages?

I'm currently on 50k before tax + commission (approx 3k p.a) trying to support a young family on that wage inside the m25, is a struggle so am investigating ways I can make my money go a bit further. If I went self-employed I'm assuming I'd be able to put things like my travel, phone and internet against tax as opposed to them coming out of my pocket after tax as they do currently?

I also assume he'd save some money not having to pay national insurance?

Am I barking up the wrong tree? Or is there logic in this?

 

[Newchodge]

Being an employee or being self employed is not a choice, it is a fact. HMRC would be suprised if you could do the same thing for the same organisation that you have been employed by, and legally be self employed.

The penalties for you and the organisation can be quite severe.

Have a look on hMRC website to check your employment status.

 

[Mr D]

Yes he'd save some money by not paying employers NI, holiday, pension, sick pay etc.
But its not a choice made by the employer or employee based on what each wants. There have been decisions made going back years that someone classed by his employer as self employed was not. Quite a bit of payment for unpaid holidays.

 

[gtw2856]

Ok thanks guys this is very helpful!

 

[STDFR33]

Why would you want to forfeit rights such as holiday pay, pension etc for the sake of saving a couple of quid in tax?

And some expenses such as travel won’t be allowable anyway.

 

[paulears]

Run your circumstances through the HMRC page/self-employment checker on their website. One of the questions is to do with the number of clients you have. If all your work is for one client, then that's pretty conclusive proof you're an employee. If you work for yourself, it can be great. You can send somebody else to do your job, without telling the client, You can even pay that person less than you charge the client. Sadly, you also have quite a bit of responsibility - you need to pay all of your own pension contributions, you need to save for when you are ill, and cannot invoice. Holidays can be very expensive, and I often don't take them because the money I lose is important to me. I have to save money from my income so that when my accountant tells me I need to pay HMRC, I actually have the money sitting there. Clients never pay invoices regularly - 30 days is typical, bit sometimes, if their accounts dept are busy, you might get put into the next payment period and have to miss a month!

Your current boss would love you to be self-employed as it saves him money, but he can also discover he gets a huge bill for your unpaid tax and national insurance when the Revenue catch him out and decide he's doing it to avoid paying tax. They can come after you too. This current trend to pretend self-employment is rarely good for the employee, unless it means you can earn more money by working for other people too!

 

[Mr D]

Run your circumstances through the HMRC page/self-employment checker on their website. One of the questions is to do with the number of clients you have. If all your work is for one client, then that's pretty conclusive proof you're an employee. If you work for yourself, it can be great. You can send somebody else to do your job, without telling the client, You can even pay that person less than you charge the client. Sadly, you also have quite a bit of responsibility - you need to pay all of your own pension contributions, you need to save for when you are ill, and cannot invoice. Holidays can be very expensive, and I often don't take them because the money I lose is important to me. I have to save money from my income so that when my accountant tells me I need to pay HMRC, I actually have the money sitting there. Clients never pay invoices regularly - 30 days is typical, bit sometimes, if their accounts dept are busy, you might get put into the next payment period and have to miss a month!

Your current boss would love you to be self-employed as it saves him money, but he can also discover he gets a huge bill for your unpaid tax and national insurance when the Revenue catch him out and decide he's doing it to avoid paying tax. They can come after you too. This current trend to pretend self-employment is rarely good for the employee, unless it means you can earn more money by working for other people too!

Not forgetting that if the client goes under you can lose all the money they owe you. Employees don't have quite the same problem there these days.