Its not only employers NI but holiday pay as well. It costs roughly 25% more to employ someone than the hourly rate they get so if you’re on £8/hr, its costing roughly £10/hr to the employer so that is the bare minimum you want to be starting at.
You can charge by the mile, the hour, the day, the week, whatever the hell you choose.
Whilst you can save a few bob on tax, there are a lot of downsides…
If you go self employed, you lose all employment rights, they don’t have to give you work and don’t have to give you any notice. If there’s no work that day, you could turn up and literally be sent home with no comeback and no pay. They don’t even have to pay you on time. If they’re a fairly large concern, they would expect to be invoiced monthly and not pay you for 30 days or 60 days so it could be 2 to 3 months before you actually get paid for the first day you drive for them.
Effectively you have:
No sick pay when you’re off sick.
No holiday pay
No notice period if they don’t want you
No right to set hours
No disciplinary procedure
No right to be paid on time or even at all.
Also. In your first year if you earn enough to pay tax you pay TWICE AS MUCH TAX in the first year as your tax bill for that year as you pay the same amount again “on account” for your second trading year so if you were to start this year and your tax bill was £2000, at the end of Jan 2014 you’d have to pay that £2000 plus £1000 on account so £3000 in total and then in June 2014, you’d have to pay another £1000.
Unless you can claim a ton of mileage for travel to work which will be your biggest tax deductible expense it isn’t worth it. If you’re only travelling 10 miles each way a day to work and back, its not worth it.
In addition to the above, being self employed makes it hard to get a mortgage or loans in your first couple of years or longer for a mortgage and if you do get a mortgage, you usually end up with a higher interest rate which wipes out some of the savings on tax.
Thanks for the reply. I won’t (shouldn’t) have any trouble getting work. Being a casual coach driver with class 1 as well means I’m getting a couple of phone calls each week from firms offering me some work.
I have private health insurance so sick pay won’t be a problem, it pays out 80% of my average weekly earnings which is more than enough to live on.
I don’t have holidays, not what most people would class as holidays. A long weekend at a bike rally scheduled into a 45 so I only loose a couple of days.
Most of my work will be for a local operator in town so the mileage will pay for new shoes any other work is 20 miles away with the odd job out of London or the midlands so I’d be quids in on the mileage for those jobs.
I’m in the middle of renovating a house at the minute and struggling to find time away from work to do it. So filling my off time won’t be a problem.
Unless you’ve got a brother who is an accountant, and a wife to do everything like take bookings, etc. then I would be invoicing for £18ph minimum, or not bother at all. There’s a lot of work out of the driver’s seat involved with running yourself as an “indenpendant driver”, and that’s before you consider the owner driver option, which of course is the more common one for Self-Employment as a driver.
Conner that’s only if you go sole trader if you go ltd then you should not have to pay ni and get your ni credit if you do things right.
You will not pay twice as much in your first year
Usually you’ll pay on Jan 31 in your first year then you’ll pay half of you first year on july 31 the following july then the balence on Jan 31 thi is how the sole trader set up works
Ltd co
You’ll pay one tax bill per year but accounts charges will be higher the only one you’ll pay is corperation tax you shouldn’t have any other tax bills to pay
alix776:
Ltd co
You’ll pay one tax bill per year but accounts charges will be higher the only one you’ll pay is corperation tax you shouldn’t have any other tax bills to pay
Sent
But you’ll have to pay yourself a wage which will be taxable as you will be an employee of the Ltd company you set up. Also you’d have to pay Employers NI out of the company funds on the wage you draw.
alix776:
Ltd co
You’ll pay one tax bill per year but accounts charges will be higher the only one you’ll pay is corperation tax you shouldn’t have any other tax bills to pay
Sent
But you’ll have to pay yourself a wage which will be taxable as you will be an employee of the Ltd company you set up. Also you’d have to pay Employers NI out of the company funds on the wage you draw.
i think it goes along the lines of paying yourself your tax free threshold then pay the rest in dividends which looks like are taxed at 10% upto 34,370
Conor:
If you go self employed, you lose all employment rights, they don’t have to give you work and don’t have to give you any notice. If there’s no work that day, you could turn up and literally be sent home with no comeback and no pay.
Surely anyone with an ounce of sense would have that situation covered in their T&C’s so a min. number of hours would be invoicable on such occasions.
alix776:
Ltd co
You’ll pay one tax bill per year but accounts charges will be higher the only one you’ll pay is corperation tax you shouldn’t have any other tax bills to pay
Sent
But you’ll have to pay yourself a wage which will be taxable as you will be an employee of the Ltd company you set up. Also you’d have to pay Employers NI out of the company funds on the wage you draw.
i think it goes along the lines of paying yourself your tax free threshold then pay the rest in dividends which looks like are taxed at 10% upto 34,370
49k in dividends tax free from memory
And as said with a good accountant and using your legal limits it’s quite possible you never going to earn enough to take 49k I’m dividends but if things look right then yes you should be able to pay you self a living wage but bear in mind you will be starting a business
The whole concept of ltd and self employed needs to be re-considered in the light of current scrutiny on the beeb employees who are taking the ■■■■ out of the entire system.
They get to pay themselves £8kpa with £30k in dividends, etc. so how exactly does a self-employed newbie make their pay up to that amount on a 48 hour week, without charging a decent whack instead of trying to undercut the agencies…?
If you pitch too low, you’ll not make any money, work stupid hours, and then get landed with a huge tax bill that renders you bust at the end of it!
I have spoken to some TM’s about this issue, and it is harder to get a foot in the door pitching £18ph self-employed than getting on as agency where the agency gets £20ph of which the driver might get £12-£14.
It’s all about insurance, and other legal liabilities. There’s obviously something wrong with the system if the 6 points OK £20ph cost-to-company driver gets taken on ahead of a clean-licenced, £18ph ltd driver eh?
I’m still waiting for the insurance system to change before I decide to pitch my tent on the ltd front - put it that way.
No, if you are a Ltd Co. then you pay yourself a nominal salary (usually around £5,000 to avoid paying little if any employees NI), you then pay tax on profits (that’s after your salary and expenses) at 20% and then pay the remainder of your salary as a dividend after deduction of profits. You need to register as a Ltd Co. at Companies House with you as director and shareholder. An accountant can do the setting up for you and it shouldn’t cost much more than £50 - £70. You need to keep scrupulous records and do your invoicing properly - on headed paper etc. There was a very good website I found some time ago which explained the pitfalls etc, will try & find/post it.
One of the important things is that you deal direct with the companies, preferably at least two. If you still work through an agency as a Ltd Co. then you would come under the scope of IR35 which is a minefield if the taxman starts poking his nose in.
mucker85:
I’m not sure I want to go the whole hog and go ltd company, wouldn’t that mean I was an employee and would then pay tax PAYE?
As previously stated
alix776:
Ltd co
You’ll pay one tax bill per year, the only one you’ll pay is corperation tax you shouldn’t have any other tax bills to pay
tallyman:
There was a very good website I found some time ago which explained the pitfalls etc, will try & find/post it.
One of the important things is that you deal direct with the companies, preferably at least two. If you still work through an agency as a Ltd Co. then you would come under the scope of IR35 which is a minefield if the taxman starts poking
For want of repeating myself, IMO the OP would be better off attending a few of the free seminars run by the HMRC business education support unit hmrc.gov.uk/bst/
These will help them understand the various aspects of going S/E or ltd Co inc
Becoming a director
Setting up a company
Understanding PAYE & NI inc the various thresholds
How VAT works
mucker85:
Basically I’m pee-ed off having 3 regular part time jobs and getting hammered for tax as a result.
but if you’re earning £■■■ from 3 part time companies shouldn’t you be paying the same tax as you would if earning the same money through 1 company?
I’m just guessing here, but only one of the companies would normally use the OP’s tax code when calculating wages, so the other two are using basic rate. I know there are ways of splitting it, but if all jobs are irregular then it won’t all work out until the end of the tax year so in the meantime payslips can look really dire.
But with 2 of the 3 P/T jobs being taxed at “emergency tax” shouldn`t there be some rebalancing (repayment) to the OP at the end of the tax year when the taxman realises the OP has overpaid?
Pierre like you I’ve been running ltd co for over 3 years now
To the op you need to work out how much you need to work out how much you need to live on the add enough to cover holidays etc and you have your pricing
Winseer:
Unless you’ve got a brother who is an accountant, and a wife to do everything like take bookings, etc. then I would be invoicing for £18ph minimum, or not bother at all. There’s a lot of work out of the driver’s seat involved with running yourself as an “indenpendant driver”, and that’s before you consider the owner driver option, which of course is the more common one for Self-Employment as a driver.
At £18/hour you’ll have plenty of time to do your accounts and take bookings
any other work is 20 miles away with the odd job out of London or the midlands so I’d be quids in on the mileage for those jobs.
