Lets settle this once and for all

UK PROFESSIONAL DRIVERS FORUMS THE UK PROFESSIONAL DRIVERS FORUM (INTERACTIVE)
1

After much misinformation being put on here about “Self Employed” drivers and the numerous arguments from “Dieseldoforme” I think its time to get it all settled once and for all.

So here goes.

Richard Head works for a company on the books full time

Anthony Head works self employed for the same company as a LTD company driver, as well as other companies and even agencies.

Both of them ALL work the same hours every week, lets say 65 paid hours a week (Not unrealistic at all)

Lets also say that both of them work for a standard rate of £10 per hour and even throw in the overtime after 8 hours at 1.5x and Sunday at double time.

So this is what Richard Head’s pay slip looks like

40 Hours at £10.00
25 Hours at £15.00
GROSS PAY = £775.00

PAYE Tax (20%) = £129.17
NI = £75.12

Take home = £570.71

This amount will fall drastically after the “Employee” has earned over £32,011 as he will then be on 40% tax.
No deductions for mileage as this is a single place of work for Richard Head.

Now as dieseldoforme keeps quoting, “You get holiday pay” so say 5.6 weeks a year - this equates to 364 Hours a year (at standard rate) so this is £3640 less the 20% or 40% tax and also less NI Contributions. (Roughly £70 a week) - Take home holiday pay on 20% tax rate = £3033 less 5.5 weeks NIC at £55 per week (302.5) = Take home £2730.50 per year holiday pay.

Now Anthony Head, he works the same hours BUT gets an extra £1 an hour on the standard rate

So 40 Hours at £11 per hour = £440
and 25 Hours at £16.50 = £412.50

Thats a gross of £852.50

Then there is VAT (Flat Rate) to add on of £170.50

So, the weekly invoice is £1023

Now the deductions.

VAT Flat Rate Scheme is 9% of the invoice (in the first year so thats £92.07)
Say £35.00 in expenses per day (Mileage and meal etc.) x 5 days = (£175 to come off the amount before tax)

That leaves you £755.93 before tax.

None or very little NIC as you dont pay tax or NI on “Dividends” so your official pay is £7755 per year and the rest is taken as “Dividends”

Take off your profit amount anything you buy (Company vehicle, Insurance, TV, Laptop, Pelmets, CPC Course, Paper, Tea Bags, Coffee. The list is endless) so say this amount is about £5000 a year so break this down to £100 a week.

So the only tax to pay now is 20% Corporation Tax on the profit thats left (£655.93) so that is £109.32

So your take home every week would be £646.61

Thats £75.90 a week better off than Richard Head every week, a lot more better off when richard head is on 40% tax.

So near enough £4000 a year better off than Richard Head - Less the £2730.50 Holiday pay = £1269.50 better off.

£25 a week may not sound too attractive but it adds up

Also, you are able to work for whatever rate you can get, you can buy a company vehicle (Van) or anything that can be classed as a business expense. 20% off anything you buy is a good number, it makes sense why most companies “Spend up” before April every year.

Right, now the small print. I have not spent a lot of time calculating this, there will be some mistakes and also the amounts quoted above are nowhere near what I earn. I used this example to show the basics behind the LTD Company / PAYE argument.

No liability accepted for any wrong information :smiley:

2

My head hurts now :confused: :smiley:

3

so who gets the better deal when wanting a mortgage taking into account you cant use any of your claimed expenses as income :sunglasses:

4

nick2008:
so who gets the better deal when wanting a mortgage taking into account you cant use any of your claimed expenses as income :sunglasses:

The mortgage offer would depend on the dividends taken from the ltd co .

5

nick2008:
so who gets the better deal when wanting a mortgage taking into account you cant use any of your claimed expenses as income :sunglasses:

The PAYE employee gets a better deal as the self employed driver would REALLY struggle showing a suitable income. A specialist broker would probably know a way around it, there are many directors with mortgages.

6

Another downside is that the SE driver will be the first one laid off, as his employers won’t be liable for any compensation.

7

Dan Punchard:

nick2008:
so who gets the better deal when wanting a mortgage taking into account you cant use any of your claimed expenses as income :sunglasses:

The mortgage offer would depend on the dividends taken from the ltd co .

That would make no difference

8

I know a few employed drivers who have been made redundant, got company share schemes, got company pensions, get good long term sick pay etc.

I am self employed, I pay an accountant, I struggled to get a mortgage. They all want to see your last 3 years accounts to base their income calculation on, the days of self certifying income are long gone.

The employed never have to worry about a tax investigation, I have had to deal with 2 in the last 25 years. Anyone who thinks that you can put down what you like as an allowable expense and it will never come back to bite you is mistaken. The first time I was investigated was my then accountants fault. He had put a decimal point in the wrong place, I did not check it, signed the tax return and then started getting letters from the revenue. I had words with the accountant but he would accept no liability, as he pointed out I had signed the tax return as being correct. I tried to claim on his professional liability insurance and got nothing. For income tax the revenue will go back 6 years, for capital gains they can go back as far as they like. My second investigation lasted two years, lots of stress, lucky I had insurance to cover the accountants fees.

If I had the choice of being employed or self employed as a driver I would take employed every time. It only makes sense to be self employed for me as I do other things apart from driving. It certainly is not worth it for a pound an hour more pay.

9

Santa:
Another downside is that the SE driver will be the first one laid off, as his employers won’t be liable for any compensation.

But as a SE driver, you would not just work for a single company so would be able to go where you want.

10

That rings true with my experience as an LLP however VAT is 20% but as has been said is typically paid back at a flat rate of 9%.

I know I’m far better off trading as an LLP than I ever was or would be as a PAYE employee

11

trubster:

Santa:
Another downside is that the SE driver will be the first one laid off, as his employers won’t be liable for any compensation.

But as a SE driver, you would not just work for a single company so would be able to go where you want.

i’d say where there’s work, rather than where you want. i’m sure there are plenty of se driver with an abundance of work, but i’m sure there a fair few without full weeks every week.

out of interest how many se drivers charge an overtime rate? all the se i know charge a flat rate

12

stevieboy308:

trubster:

Santa:
Another downside is that the SE driver will be the first one laid off, as his employers won’t be liable for any compensation.

But as a SE driver, you would not just work for a single company so would be able to go where you want.

i’d say where there’s work, rather than where you want. i’m sure there are plenty of se driver with an abundance of work, but i’m sure there a fair few without full weeks every week.

out of interest how many se drivers charge an overtime rate? all the se i know charge a flat rate

Well I will get in there quick as number 1.

I charge overtime after 8 at 1.5x
Sat at 1.5x
Sunday at 2x

13

Overtime after 8 at time and a half of basic rate. Double basic rate on Sundays. Don’t do Saturdays.

14

turbot:
I know a few employed drivers who have been made redundant, got company share schemes, got company pensions, get good long term sick pay etc.

I am self employed, I pay an accountant, I struggled to get a mortgage. They all want to see your last 3 years accounts to base their income calculation on, the days of self certifying income are long gone.

The employed never have to worry about a tax investigation, I have had to deal with 2 in the last 25 years. Anyone who thinks that you can put down what you like as an allowable expense and it will never come back to bite you is mistaken. The first time I was investigated was my then accountants fault. He had put a decimal point in the wrong place, I did not check it, signed the tax return and then started getting letters from the revenue. I had words with the accountant but he would accept no liability, as he pointed out I had signed the tax return as being correct. I tried to claim on his professional liability insurance and got nothing. For income tax the revenue will go back 6 years, for capital gains they can go back as far as they like. My second investigation lasted two years, lots of stress, lucky I had insurance to cover the accountants fees.

If I had the choice of being employed or self employed as a driver I would take employed every time. It only makes sense to be self employed for me as I do other things apart from driving. It certainly is not worth it for a pound an hour more pay.

Aghhh!! Rates are negotiable when you’re self employed. How many businesses do you know that allow the customer to set the price they pay■■? Have you ever asked for more money?

Don’t believe everything an agency (or even business owner) says at first…

You’re selling a service and if you can do the job well, that’s worth a premium to someone. However, if you just accept what they say, they’ll happily just pay you a quid an hour more.

The last deal I did (with an agency) was quick and easy. He offered me the PAYE rate and, after I’d had a chuckle with him over it, we shook hands on a rate some £4.50 an hour more than the PAYE agency lads were on…plus a similar overtime increase after 8 hours.

He then admitted that most drivers don’t ask so they don’t give. Fair enough this wasn’t available on every contract they had - he made that clear. All but one though. Which is why I will only work on the ones it was available on…

15

I only charge overtime for weekends as I charge myself out by the shift based on a 10 hour shift.

16

But if PAYE on agency Richard head would be able to claim mileage and meal allowance just the same

Who would have to pay for an accountant and would the company the self employed driver works for still pay him when on holiday or would he have to pay himself so then only charging the company he works for 47 weeks pay per year.

17

In the real world, if the self-empoyed driver was told “he can only charge an extra pound an hour”, he’d just walk to the next yard, and not be bothered about being employed at Skinflint yard number one.
The whole “pound an hour” thing is a made up amount by umbrella companies to palm off lack of holiday and sick pay in the subcontract. It relies of course upon the mug driver not having a clue as to how and why he’s being ripped off.

A proper self-employed driver in other words, NEVER works via an umbrella. He charges a lot more than £1 an hour more than the same-job PAYE guy…

Agencies tend to invoice for 40-50% more than what their driver gets paid. This is with VAT added on top as well. Thus, a £10ph PAYE bod like me is actually costing the hiring yard around £16ph when one includes the VAT on the invoice.

All the Self-employed driver has to do to be competive therefore, is come in with his rate anywhere between £13 and £15ph…
If he’s pitching £11ph in this example, then he needs to report to the nearest neurosurgery for a brain transplant with all due haste. :smiling_imp:

18

Self employed or Ltd Co, I’ve never had an issue getting a mortgage, as my bank sees what goes through my business & private accounts, and apply their common sense.

Regarding rates, I charge a minimum 10hr shift at a set week-day or week-night rate; then by the hour for any hours over that. Saturdays & Sunday are also 10hrs at higher rate. Nights Out & European are negotiable.

19

trubster:
Now Anthony Head, he works the same hours BUT gets an extra £1 an hour on the standard rate

So 40 Hours at £11 per hour = £440
and 25 Hours at £16.50 = £412.50

Thats a gross of £852.50

Then there is VAT (Flat Rate) to add on of £170.50

So, the weekly invoice is £1023

Now the deductions.

VAT Flat Rate Scheme is 9% of the invoice (in the first year so thats £92.07)
Say £35.00 in expenses per day (Mileage and meal etc.) x 5 days = (£175 to come off the amount before tax)

That leaves you £755.93 before tax.

You might of made a wrong assumption there. As far as i know when the agencies push you towards self employed for the extra £1 they usually have some set up in mind for you or some scheme for you to join. I’m not saying there isn’t any but i’ve never heard of any of them charging VAT for their services. The only ones i’ve come across who do this are “genuine” self employed who charge out to companies at their own rates? Try that calculation again without the VAT element, its late and i’m to tired to do it myself :smiley:

20

trubster:
Lets also say that both of them work for a standard rate of £10 per hour and even throw in the overtime after 8 hours at 1.5x and Sunday at double time.

So this is what Richard Head’s pay slip looks like

40 Hours at £10.00

Now Anthony Head, he works the same hours BUT gets an extra £1 an hour on the standard rate

So 40 Hours at £11 per hour = £440

:laughing: :laughing: I’m off to give my head a shake, they’re both on £10 per hour and one gets £11 per hour. Its probably me i know, i’ll look again in the morning with a fresh pair of eyes :laughing: :laughing: