Employment Question

AiiR · 16 May 2011 at 15:50

Right, been out of work for a while, and the other day it was suggested to me that I should try and become self employed, where I pay my own taxes and National Insurance. Does anyone have any experience of doing this? Or if anyone could elaborate on what's involved and whether it's worth doing, that'd be grand.

Ta.

Delboy · 16 May 2011 at 15:53

If you're self employed you have to fill out a self assessment form from the HM Revenue people where they calculate tax owed etc based on your earnings.

AHarvey · 16 May 2011 at 15:54

firstly, can you do anything that you could possibly do as a business?

Secondly, isn't your NI paid anyway out of dole money?

Amnesia · 16 May 2011 at 15:57

self employed doing what ?

Freakbro · 16 May 2011 at 16:00

If you are going to go self employed, just contact the Tax Office to inform them.

Then you are running a "business" - so you keep all your income/expenditure receipts & documents and at the end of your financial year (usually its simpler to keep that to the tax year 6th April-5th April) you fill in your self assessment and it shows what Tax & NI you owe.

You will also have to pay Class 2 National Insurance as you go along which is £2.50 / week

If your turnover (gross income before expenses) is less than £73,000 then you don't need to register for VAT if you dont want to, if its more you have to register for VAT.

So yea, becoming "self-employed" is as easy as making a phone call to HMRC....making a successful and profitable businesss however is a much trickier task..

AHarvey · 16 May 2011 at 16:04

I thought the class 2 NI was if you earned over a certain amount?

davieg · 16 May 2011 at 16:04

Amnesia said:
self employed doing what ?

This is important as say for example its in the construction industry you need to get a CIS card before you can do certain things, so what your planning on doing involves different answers to your question.

Freakbro · 16 May 2011 at 16:06

AHarvey said:
I thought the class 2 NI was if you earned over a certain amount?

True, you can get exempted if your earnings are less than £5315, but we would hope for higher aspirations than that!

AiiR · 16 May 2011 at 16:17

Amnesia said:
self employed doing what ?

(This is just what I've been told, so may/may not be correct)

It's hopefully be within IT somewhere, but apparently when self employed you can contact a company or business? And do, say, a weeks work or so. They pay you a flat rate but not your taxes etc, it's down to you to pay that.

I just assumed self employed meant having your own business and selling a service or product, which is why I'm sort of asking for clarification and such.

Freakbro · 16 May 2011 at 16:26

AiiR said:
It's hopefully be within IT somewhere, but apparently when self employed you can contact a company or business? And do, say, a weeks work or so. They pay you a flat rate but not your taxes etc, it's down to you to pay that.

That's correct in a simplistic term, yes.

You would do work for anyone, another company or individual, then you would invoice them. This could be on a per hour basis or a set amount , agreed beforehand via a quote. They then pay your invoice - this goes towards your business's total turnover.

You then deduct all business expenses relating to achieving that turnover (income) - This then gives you your net profit. You are taxed at the end of the financial year on your total net profit.

simples

Being self employed isnt exclusive to having an employed job either. You could have both, say a part-time job that pays regular income and your self-employed work in your other time.

AiiR · 16 May 2011 at 16:33

Freakbro said:
That's correct in a simplistic term, yes.

You would do work for anyone, another company or individual, then you would invoice them. This could be on a per hour basis or a set amount , agreed beforehand via a quote. They then pay your invoice - this goes towards your business's total turnover.

You then deduct all business expenses relating to achieving that turnover (income) - This then gives you your net profit. You are taxed at the end of the financial year on your total net profit.

simples

Being self employed isnt exclusive to having an employed job either. You could have both, say a part-time job that pays regular income and your self-employed work in your other time.

This is exactly what I needed to know, thanks a lot.

anything I don't mind · 16 May 2011 at 16:37

As i have been interested in this info myself, Do you know if there is a list of what constitutes a tax deductible expense and what does not.

For example:
Transport to work
Work clothes
Food whilst at work

Dave M · 16 May 2011 at 16:37

AiiR said:
I just assumed self employed meant having your own business and selling a service or product, which is why I'm sort of asking for clarification and such.

Or contracting, more common in the trades (building site stuff) where you contract for a job, do it, get paid, go look for the next job.

They get paid more than trades who are employed by a firm but they're usually better skilled and if work drys up they don't get paid for a while.

Vonhelmet · 16 May 2011 at 16:38

Delboy said:
If you're self employed you have to fill out a self assessment form from the HM Revenue people where they calculate tax owed etc based on your earnings.

Close, except it's you that gets to calculate your tax

davieg · 16 May 2011 at 16:43

vonhelmet said:
Close, except it's you that gets to calculate your tax

Yeah except they never believe my maths lol. Saying that I still get self assessments now and not been self employed for nigh on 9 years, they just say I'll stop getting them when some person reviews if I still need to get them...Will probably be doing them on my death bed at this rate

Freakbro · 16 May 2011 at 16:44

vonhelmet said:
Close, except it's you that gets to calculate your tax

Well, with the online submission now, it does do it for you!

I did always do my clients SA's on paper though, until they brought forward the paper filing date to Oct

So now its online submission and I still get to Jan

Ev0 · 16 May 2011 at 16:45

AiiR said:
It's hopefully be within IT somewhere, but apparently when self employed you can contact a company or business? And do, say, a weeks work or so. They pay you a flat rate but not your taxes etc, it's down to you to pay that

In the IT world what you're talking about there is called contracting, where you aren't there to work as a full time employee but as a contractor for an amount of time.

You can either go the self employed route with your own company, or work through an umbrella company.

Freakbro · 16 May 2011 at 16:46

groen said:
As i have been interested in this info myself, Do you know if there is a list of what constitutes a tax deductible expense and what does not.

For example:
Transport to work
Work clothes
Food whilst at work

Well thats what accountants/bookkeepers are for

Generally most things are pretty straightforward, but you did manage to highlight 3 of the things that can have complicated rules!

Vonhelmet · 16 May 2011 at 16:46

Freakbro said:
Well, with the online submission now, it does do it for you!

Ah, that's a good point actually. I stand corrected.

Still, it helps to do the maths yourself so you can figure out whether the answer is correct, before merrily paying the wrong amount.

Vonhelmet · 16 May 2011 at 16:47

groen said:
As i have been interested in this info myself, Do you know if there is a list of what constitutes a tax deductible expense and what does not.

For example:
Transport to work
Work clothes
Food whilst at work

Transport? Probably not, but it depends on the job.
Work clothes? Yes, if they're specialised and not of a kind you'd use outside work.
Food whilst at work? Generally not, though you can blag it under certain circumstances. Depends on the job.