I've recently been offered a job which will be subcontracting rather than as a regular employee. Having only ever been a regular employee paid via PAYE, how would this work for tax and national insurance etc?
I'm guessing I'll have to register as self employed, complete a tax return each year and will not be able to get redundancy pay, but what else should I be thinking/worried about?
Of course this could be the totally wrong place to be asking all of this, so please accept my apologies and tell me to jog on if that's the case.
No pension, no training, no job security, no redundancy, responsible for your own insurance, tax, transport arrangements, etc.
You invoice the business for your services and they pay you without deduction. (CIS is different)
If you are VAT registered you provide a VAT invoice and act as an unpaid collector of taxes for HMRC.
If self employed you are responsible for your tax, class 4 and class 2 NI contributions.
Class 4 is paid through self assessment
Class 2 is a set £2.70 per week (2013/14)
If you work through a limited company thats different.
You would set up a PAYE scheme for the company. The big difference is employers NI contributions that would need to be paid by yourself (so you pay 12% employee contributyion PLUS 13.8% employer contibution.... Thats why dividends are popular as there is no NI on dividends).
If you only work for one employer as though you were an employee then you may be caught by deemed employment legislation (IR35) which means that 95% of your income (after legitimate expenses and pension) is treated as salary making the dividend option unviable.
Note that the expense of running the limited company (such as accountants fee's) when caught by IR35 must come out of the 5% of turnover that is allowable.
HTH for starters,
kind regards,
Shaun.
p.s. welcome to the forum.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
