9th March 2010, 01:15 PM
Few a few things for the 'genuinely' self-employed or those thinking about it:
*You should expect a premium above those that are on the books, but not necessarily a huge amount/day. The employer will be saving on employer's NI, holiday and sick pay, pension contributions and accrued rights such as redundancy etc. However, given the apparant minimum statutory provisions that most companies seem to default to, this would perhaps all accrue to no more than, say, 15-20%.
*Consider your status: sole-trader or limited company. One benefit of being a freelancer is that what money you do charge should go further than that as an employed person. I registered as a limited company. This makes my accountancy bill about twice what it would be as a sole trader but there are a number of benefits. Others (David??) will be able to give comparable examples for sole-trader basis. I operate as follows:
Pay: as a director, the rules are a little bit different than for a 'proper' employee. I am registered for PAYE but pay myself a salary below the threshold for payments of national insurance and income tax (in my case ?100/week). This means I pay no national insurance contribuitions but because I am registered for PAYE I still qualify for a state pension. Obviously, its difficult to live off ?100/week but you can then pay yourself a dividend as a shareholder so long as you ar in profit. The dividend is taxed, but at a much friendlier rate.
Travel: Your company will be registered at home so you can claim travel and accomodation to site. The accepted rates without paying tax are 40p/mile for the first 10,000 miles and 12p/mile thereafter. In short, if you do 10,000 business miles a year you will be taking ?4k ouit of your business tax free for travel which as an employed digger you would be paying for out of your taxed earnings.
The Director's Loan Account: You can claim the full second hand value of any assets you put into the company such as books, which you can then take out, tax free, at any point so long as you are in profit.
Household Bills: you make a claim for phone, heating etc. based on the proportion of your home office so long as it is solely used as an office.
Insurance: The down side, you will need employers and public liability insuranc e which will cost, say ?200/annum. If you ar undertaking reporting work you would also be advised to have proffessional indemnity insurance. ?5m is likely to cost ?2-4K depending on how any given insurer assesses your risk.
Conferences etc: Fancy going to a conference? buying a book? Proffessional fees? it all goes through the books as a business expense.
At the end of the day, most free-lance diggers shouldn't actually end up paying much tax at all, if any, but the key is to do some research and then speak to a good accountant.
*You should expect a premium above those that are on the books, but not necessarily a huge amount/day. The employer will be saving on employer's NI, holiday and sick pay, pension contributions and accrued rights such as redundancy etc. However, given the apparant minimum statutory provisions that most companies seem to default to, this would perhaps all accrue to no more than, say, 15-20%.
*Consider your status: sole-trader or limited company. One benefit of being a freelancer is that what money you do charge should go further than that as an employed person. I registered as a limited company. This makes my accountancy bill about twice what it would be as a sole trader but there are a number of benefits. Others (David??) will be able to give comparable examples for sole-trader basis. I operate as follows:
Pay: as a director, the rules are a little bit different than for a 'proper' employee. I am registered for PAYE but pay myself a salary below the threshold for payments of national insurance and income tax (in my case ?100/week). This means I pay no national insurance contribuitions but because I am registered for PAYE I still qualify for a state pension. Obviously, its difficult to live off ?100/week but you can then pay yourself a dividend as a shareholder so long as you ar in profit. The dividend is taxed, but at a much friendlier rate.
Travel: Your company will be registered at home so you can claim travel and accomodation to site. The accepted rates without paying tax are 40p/mile for the first 10,000 miles and 12p/mile thereafter. In short, if you do 10,000 business miles a year you will be taking ?4k ouit of your business tax free for travel which as an employed digger you would be paying for out of your taxed earnings.
The Director's Loan Account: You can claim the full second hand value of any assets you put into the company such as books, which you can then take out, tax free, at any point so long as you are in profit.
Household Bills: you make a claim for phone, heating etc. based on the proportion of your home office so long as it is solely used as an office.
Insurance: The down side, you will need employers and public liability insuranc e which will cost, say ?200/annum. If you ar undertaking reporting work you would also be advised to have proffessional indemnity insurance. ?5m is likely to cost ?2-4K depending on how any given insurer assesses your risk.
Conferences etc: Fancy going to a conference? buying a book? Proffessional fees? it all goes through the books as a business expense.
At the end of the day, most free-lance diggers shouldn't actually end up paying much tax at all, if any, but the key is to do some research and then speak to a good accountant.