Switching from PAYE to Self-employed?

Discussion in 'Accounts & Finance' started by bruce24, Mar 2, 2018.

  1. bruce24

    bruce24 UKBF Newcomer Free Member

    29 0
    hello guys,
    I am employed with one of the recruitment agency. I am paid weekly as PAYE. Is it possible to change for self-employed? How is it done? Shall I call agency first or dont know fill some form?

    thanks
    bruce
     
    Posted: Mar 2, 2018 By: bruce24 Member since: Nov 23, 2016
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    9,019 910
    Your relationship would change.
    To be self employed you'd lose out employee benefits and they'd lose the ability to tell you what to do.
    HMRC have a list, subject to change, of employment status. https://www.gov.uk/employment-status

    Stop being an employee and you lose 28 days holiday a year minimum, you lose wage lower limit and you lose employer pension contributions.

    This apply to you?

    Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

    • they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit
    • they can decide what work they do and when, where or how to do it
    • they can hire someone else to do the work
    • they’re responsible for fixing any unsatisfactory work in their own time
    • their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish
    • they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work
    • they can work for more than one client
     
    Posted: Mar 2, 2018 By: Mr D Member since: Feb 12, 2017
    #2
  3. bruce24

    bruce24 UKBF Newcomer Free Member

    29 0
    Yes, but how it it with taxes than? Now as PAYE I pay NI and tax.
     
    Posted: Mar 3, 2018 By: bruce24 Member since: Nov 23, 2016
    #3
  4. Mr D

    Mr D UKBF Legend Free Member

    9,019 910
    Self employed you would usually be paid a lump sum for a job, say £3k to go and do xxx.
    You would pay tax, usually on account - part in arrears and part in advance. So say you did your first accounts next January (for sake of argument), you'd pay any outstanding tax for this tax year plus a payment towards next tax year. And again another payment on account in July towards that tax year.
    NI you would also have to pay yourself.

    There is no protection about wages, you could even make a loss in any year. That's zero profit.
    And your profit as a self employed person is your income.

    Still, you could send someone else to do the work. You could start at what time you want and finish at what time you want. Even work the days you want.
    And use your own tools which you would have to pay for. May even get paid lump sum by the company within 60 days!
    Oh and if the client goes under you add the debt owed to you to any other debts that may get paid in part eventually.
    And have the contract terminated whenever the companies you work for want - they can simply say we don't need you any more, please leave.
    It can be quite liberating being self employed. It doesn't suit everyone though.
     
    Posted: Mar 3, 2018 By: Mr D Member since: Feb 12, 2017
    #4
  5. Newchodge

    Newchodge UKBF Big Shot Free Member

    9,667 2,441
    The only difference in terms of tax is that you can claim some expenses which may reduce your tax bill.

    Being self employed is not a choice it is a question of fact, and you have been pointed to the governemnt status checker.
     
    Posted: Mar 3, 2018 By: Newchodge Member since: Nov 8, 2012
    #5
  6. SteLacca

    SteLacca UKBF Enthusiast Free Member

    938 178
    Employed or self-employed is not a matter of choice, it's a matter of fact.
     
    Posted: Mar 5, 2018 By: SteLacca Member since: Jun 16, 2016
    #6
  7. Peterse12

    Peterse12 UKBF Newcomer Free Member

    1 0
    As above, you cannot just change your employment status because you want to.
     
    Posted: Mar 5, 2018 By: Peterse12 Member since: Mar 5, 2018
    #7
  8. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,530 857
    If you are PAYE now, that is a strong indication that there is no self employment.
     
    Posted: Mar 5, 2018 By: STDFR33 Member since: Aug 7, 2016
    #8
  9. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    867 182
    Do you want to become self-employed or are you being asked to become "self-employed"? If the former, for what reason?

    Everything said above about employment status largely being a matter of fact rather than a choice is true, although if there is benefit to you becoming self-employed then there isn't really any risk to you - tax wise at least - so long as you file your tax returns and pay your tax on time. If the employer is investigated it would be them on the hook for false self-employment, failure to correctly operate PAYE and non-payment of employer NIC.

    If this is something you want to do voluntarily have a careful think about the rights you'd be losing out on. This is where the risk lies from your point of view.
     
    Posted: Mar 5, 2018 By: TheCyclingProgrammer Member since: Jul 15, 2014
    #9
  10. bruce24

    bruce24 UKBF Newcomer Free Member

    29 0
    Thanks for answers, guys.

    My friend recommended me to be self-employed, than I can work for not only one agency and also have some other incomes like being contractor.

    I have another question. What is a difference in between being self employed and being registered as Limited Company?

    Could I be self-employed and also fork for other agency as a PAYE?
     
    Posted: Mar 8, 2018 By: bruce24 Member since: Nov 23, 2016
    #10
  11. Mr D

    Mr D UKBF Legend Free Member

    9,019 910
    Self employed the profit of the business is your income
    Limited company you work for your company, your income is wages (if any) your company pays you plus dividends. The profit of the company belongs to the company and not you. Company profit taxed different than personal profit.

    https://www.gov.uk/employment-status/selfemployed-contractor

    Have a look at the link, see if you can figure out what you want to be.
     
    Posted: Mar 8, 2018 By: Mr D Member since: Feb 12, 2017
    #11
  12. SteLacca

    SteLacca UKBF Enthusiast Free Member

    938 178
    Before you do anything you really need to sit down and speak with an accountant. There are potential IR35 issues in what you are proposing that need to be considered and addressed.

    As has already been mentioned, there's also the loss of employment rights to consider and, depending on your level of income, possible VAT implications.

    It's not a black and white decision, with much to consider.
     
    Posted: Mar 8, 2018 By: SteLacca Member since: Jun 16, 2016
    #12
  13. Freelanzguy

    Freelanzguy UKBF Newcomer Free Member

    14 1
    You should probably stay as PAYE with agency for current role. If you want to also take on additional work, you could set up a limited company for that work. Any money you earn there you leave in the company (assuming you don't need the extra income), paying corporation tax. As and when you current job through the agency is finished you could do future work through the company and start withdrawing a salary from there, having build up a cash reserve.
     
    Posted: Mar 9, 2018 By: Freelanzguy Member since: Feb 9, 2018
    #13
  14. SteLacca

    SteLacca UKBF Enthusiast Free Member

    938 178
    With all of the associated administration and obligations, not to mention having to ensure that each contract is IR35 compliant.

    As for building up cash reserves, you would be in danger of rendering the company an investment company rather than a trading company, which could cost capital treatment on any end distribution, rendering it liable to income tax.

    And the current Government have been making noises about legislating against moneyboxing anyway. If they do legislate, you may find that you have done it all for nought.

    I stand by my "You need to sit down with an accountant" statement.
     
    Posted: Mar 9, 2018 By: SteLacca Member since: Jun 16, 2016
    #14
  15. bruce24

    bruce24 UKBF Newcomer Free Member

    29 0
    So I can stay as PAYE and be self-employed, or having a Limited Company doesnt imply to be self-employed. So if I am doing some work for an agency as PAYE and after work or weekends I would like to do some services to some other poeple,and take money for it. I has to have LTD? Why cant I have income than? So all income goes to LTD bank account not me yes? Theoreticly I could withdraw money from my company account isnt it?
     
    Posted: Mar 9, 2018 By: bruce24 Member since: Nov 23, 2016
    #15
  16. Mr D

    Mr D UKBF Legend Free Member

    9,019 910
    Limited company is a separate legal entity than you. Quite common for the director to be an employee of the company and for tax purposes the company is separate from you. Its income is taxed as company income, not your tax rate.
    What you take out as wages is subject to income tax and what you take as dividend is subject to dividend tax (with a small tax free allowance).
     
    Posted: Mar 9, 2018 By: Mr D Member since: Feb 12, 2017
    #16