Help with going self employed re Tax

haaammit · 1 Mar 2016 at 21:37

Hi all - a friend has asked me to go and work with him. He doesn't want to employ me, he'd rather I was self employed to reduce the amount of paperwork he'll need to do. I'm ok with this, but have a few questions:

If I'm self employed, do I still get a personal tax amount. My partner has kind of looked into it, and seems to think I don't, but I'm sure I must still get a personal allowance tax free?

Some of the online stuff seems to show that the tax I'd have to pay would be part of my profits? How would I work that out?

The scenario is my mate owns a mobile catering business. The idea short term is that I will be his sous chef to learn the ropes, and then eventually have my own team to go do our own functions (sourced from my mate as it's his business, and he wants to expand and stop turning away functions he can't currently cover due to lack of staff/teams).

How do I make sure I pay enough tax, and do I get a tax free allowance?

I'm sorry if the details are a little vague, just want to make sure I'm doing the right thing.

Bluecube · 1 Mar 2016 at 21:46

Everyone has a personal tax allowance which is currently £10,400. You pay tax on your profits minus your tax allowance.

From the description of what you'll be doing it sounds as if the tax man will view you as an employee of your pal no matter what either of you say... I would step warily and if you're unsure go and see an accountant.

haaammit · 1 Mar 2016 at 21:58

Yeah, I get what your saying about being an employee, but my mate wants to have like a partnership once I'm up to speed.

Can I not charge him for my services as a head chef?

Bluecube · 1 Mar 2016 at 22:13

If you're selling your services exclusively to your mate, or his payments for the bulk of your income then you will be viewed as an employee.

haaammit · 1 Mar 2016 at 22:28

Can I not Contract myself, if that even means something?

Destination · 1 Mar 2016 at 22:48

Go talk to an accountant.
You can be self employed, but if you only provide one service to one person, the tax man might become very interested in you.

wingman · 2 Mar 2016 at 21:20

Barry McFungus Pants said:
The scenario is my mate owns a mobile catering business. The idea short term is that I will be his sous chef to learn the ropes, and then eventually have my own team to go do our own functions (sourced from my mate as it's his business, and he wants to expand and stop turning away functions he can't currently cover due to lack of staff/teams).

How big is this business, I'm guessing rather small at the moment if he's trying to circumvent traditional methods of employment.

Have you considered joining him as a partnership?

haaammit · 5 Mar 2016 at 18:50

wingman said:
How big is this business, I'm guessing rather small at the moment if he's trying to circumvent traditional methods of employment.

Have you considered joining him as a partnership?

Sorry for the late reply. He's basically a sole trader. The idea long term is to join as a partner and run essentially my own division. It's more for the initial training up period.

Destination · 6 Mar 2016 at 09:02

Then you set yourself up as a self employed sole trader, and go from there.
It isn't an Ltd, it doesn't involves, shares, dividends and employing yourself, it is a more simple matter of being a self employed contractor, you bill him for your work, he pays your invoices, and you go forth from there.

You'll need to investigate the VAT side of your services. See if you need to be charging him vat on top of your service or not. I wouldn't have a clue in this field.

Freakbro · 6 Mar 2016 at 10:08

Hikari Kisugi said:
Then you set yourself up as a self employed sole trader, and go from there.
It isn't an Ltd, it doesn't involves, shares, dividends and employing yourself, it is a more simple matter of being a self employed contractor, you bill him for your work, he pays your invoices, and you go forth from there.

You'll need to investigate the VAT side of your services. See if you need to be charging him vat on top of your service or not. I wouldn't have a clue in this field.

Unlikely, VAT registration threshold is £82,000 turnover

To OP - if you are going to do this (are you employed as well?) Just register with HMRC as self employed, set up an online government gateway account, activate the self employment section. Then at end of tax year you input your PAYE earnings and your Self employment income/expenses and it will calculate what your overall tax/NI position is.