Hello, im on starting up a single car transport business to try and get away from truck driving full time im wondering about this IR35 for LTD drivers…now ive never been self employed so please bare with me if i sound like a bit of a novice
i plan on running my single car transport business through a LTD company but jumping on the wagons in quiet periods via agency to top up my income, my question is because im genuinely self employed but do a bit of part time wagon driving would i fall outside of this IR35 thing? if not can you run a LTD company paying your own taxes as well as being classed as employed PAYE via agency?
i dont fully understand this IR35 thing but to my knowledge it applies to drivers working for the same company constantly exactly as a full time driver would, id be moving around different companies and not solely sticking with one if that makes any difference
You can be in and out at the same time on different contracts. So the car transporting work you’ll be out of IR35, you own the truck, you take on risk.
With the agency it’s even possible to have some of the agency work inside IR35 and other work at the same agency outside of IR35 depending on the turnover and number of employees of the client however to make things simple and so the agency doesn’t end up with a big tax bill they’ll just place everything in IR35. Whilst it is still possible to be Ltd the agency would deduct tax and NI at source so what they’d pay you out of what you invoice them would be less tax and NI. So in that case you’re no better off than being on PAYE but if you’re still Ltd you’d not be entitled to holiday pay, workplace pension, SSP or any rights as an employee from the agency so it’s the worst of both worlds. However ultimately the choice is taken away from you as most agencies are telling Ltd drivers if they want to continue working they have to go on PAYE with the agency, mostly to minimise the risk to them.
There’s nothing stopping you from being both Ltd and PAYE at the same time so you can do Ltd with your car transporting, PAYE on agency.
Note that you can be on PAYE, and be working for several different companies.
Having multiple employers doesn’t make you self employed.
There is a lot of info on the .gov site about this. If in doubt talk to them, and/or pay an accountant. Even if you do your own accounts later, it might be a sound investment using one to set things up at first.
One problem with doing agency work where you are on the agency’s payroll is that you only get the £169/week NI allowance if you earn at least £169 that week. If you miss weeks throughout the year (as most drivers do) you lose £169 of NI tax free allowance for every week that you don’t work.
Employees who are paid at least £169 each week throughout the year, get the full (52weeks x £169/week) = £8788 NI tax free allowance (2020/21 tax year).
By having a LTD company, you can (the company director) pay yourself in March each year and claim the whole £8788 NI tax free allowance.
By being a company director you get a £8788 NI tax free annual allowance (2020/21 tax year).
By being an agency employee (on the agency’s payroll) you only get £169/week NI tax free allowance for those weeks of the year that you work.
If you only worked 6 months of the year through an agency’s PAYE, you would only get 26weeks x £169 = £4394 NI tax free allowance. (ie. you’ve lost half of the NI annual tax free allowance…which as you can see isn’t annualized if you aren’t a company director or paid everyweek through someone else’s payroll).
carlston49:
One problem with doing agency work where you are on the agency’s payroll is that you only get the £169/week NI allowance if you earn at least £169 that week. If you miss weeks throughout the year (as most drivers do) you lose £169 of NI tax free allowance for every week that you don’t work.
Employees who are paid at least £169 each week throughout the year, get the full (52weeks x £169/week) = £8788 NI tax free allowance (2020/21 tax year).
By having a LTD company, you can (the company director) pay yourself in March each year and claim the whole £8788 NI tax free allowance.
By being a company director you get a £8788 NI tax free annual allowance (2020/21 tax year).
By being an agency employee (on the agency’s payroll) you only get £169/week NI tax free allowance for those weeks of the year that you work.
If you only worked 6 months of the year through an agency’s PAYE, you would only get 26weeks x £169 = £4394 NI tax free allowance. (ie. you’ve lost half of the NI annual tax free allowance…which as you can see isn’t annualized if you aren’t a company director or paid everyweek through someone else’s payroll).
Hi, I’m self employed but not in road haulage, I am currently doing hgv through agency on PAYE and don’t do it year round, I can’t work out on what you have put, where I’m going to lose out on anything.
I was going to suggest to the OP on doing his work as self employed and agency on paye so as not to over complicate this, as I think it would if I went ltd on my self employed work.
weeto:
Hi, I’m self employed but not in road haulage, I am currently doing hgv through agency on PAYE and don’t do it year round, I can’t work out on what you have put, where I’m going to lose out on anything.
I was going to suggest to the OP on doing his work as self employed and agency on paye so as not to over complicate this, as I think it would if I went ltd on my self employed work.
Let’s say you worked on agency for 13 weeks during the summer and got paid £676/week on PAYE.
You would pay £60.84/week NI for 13 weeks, which comes to £790.92
However, let’s say another driver does the same but is LTD. He wouldn’t pay any NI so would be £790.92 better off. Not only that, but he would probably be on a higher hourly rate than you. And because the agency makes more money out of LTD drivers (because the agency has to pay employer’s NI at 13.8% with PAYE drivers), the agency will probably give the LTD driver more shifts.
carlston49:
However, let’s say another driver does the same but is LTD. He wouldn’t pay any NI so would be £790.92 better off. Not only that, but he would probably be on a higher hourly rate than you. And because the agency makes more money out of LTD drivers (because the agency has to pay employer’s NI at 13.8% with PAYE drivers), the agency will probably give the LTD driver more shifts.
Nope. You’re not factoring statutory holiday pay and employer’s workplace pension contributions. Unless the Ltd paid at least 13.75% more than PAYE then the PAYE driver is better off. And given many agencies pay just a quid an hour more to Ltd than PAYE then they’re not.
It’s quite funny where I am, the Ltd drivers still think they’re better off but they’re not by a long shot. Because of the changes to parity pay rules which removed the Swedish Derogation so we’re now on parity pay but which doesn’t apply to Ltd agency drivers the PAYE agency drivers hourly rate is actually 50p per hour on days and £1.50 on nights more than the Ltd rate. And that’s before you begin to add on the 33 days annual paid leave, 3% employers NI contribution plus the bonuses the PAYE agency drivers also get for microlise score and tacho infringements.
And the other thing you’re forgetting is when both drivers come to retire. Because that Ltd driver isn’t paying any NI they get no NI credits for that year and unless you’ve enough full years contributions then you either get only part of the state pension or no state pension at all. If for whatever reason they’re unable to work they’ll also be stuffed when it comes to benefits because qualification for several of those are based on your NI contributions over the previous 2 years. Also because they’ve not had any employers workplace pension scheme contributions either they’ve not got a work pension either. So in the short term whilst they may be marginally better off in the long term they’re shafting themselves for the time in their life when they’ll no longer be working.
Just had a look on HMRC site, and according to them a limited company with with the director as the only employee which is I’m guessing how these ltd drivers are operating, are still liable for NI contributions, not just the employees contribution but also the employers contribution, surely they will liable for more NI contributions than some one on PAYE, or are you saying they don’t pay anything at all?
weeto:
Just had a look on HMRC site, and according to them a limited company with with the director as the only employee which is I’m guessing how these ltd drivers are operating, are still liable for NI contributions, not just the employees contribution but also the employers contribution, surely they will liable for more NI contributions than some one on PAYE, or are you saying they don’t pay anything at all?
They use the “small salary and dividends” model. You pay yourself a small salary below the lower threshold for NI, without looking it’s around £130 odd a week, and the rest as dividends paid from the company. That way you don’t pay any NI.
There’s plenty of downsides to doing this that you don’t get told about such as how it affects your entitlement to benefits that are based on your NI contributions, such as contributions based new JSA and UC, as well as the state pension. Also it has meant that people paying themselves that way got nothing from the furlough scheme or the self employed income support schemes.
Sorry for hijacking the thread, but I have a question please, I am at retirement age and just working in my jop until a new guy is found to take over the vehicle, if I wanted to work say, a week or so a month for an agency, would I be better off, for a simple life, to go Ltd, I wouldn’t need holiday pay or pension contributions as I get my full state pension now anyway and I don’t pay NI because I am retirement age, but just to boost income to go on holiday instead of using my savings?
Why would LTD be simpler? Setting up a company and doing your own accounts and tax?
PAYE won’t deduct NI if it isn’t necessary. You will still ‘earn’ holiday pay as a temp worker. Same as if you take a perm job and only work a few months you get a proportion of a year’s worth of holiday pay.Why lose that?
sapper:
Sorry for hijacking the thread, but I have a question please, I am at retirement age and just working in my jop until a new guy is found to take over the vehicle, if I wanted to work say, a week or so a month for an agency, would I be better off, for a simple life, to go Ltd, I wouldn’t need holiday pay or pension contributions as I get my full state pension now anyway and I don’t pay NI because I am retirement age, but just to boost income to go on holiday instead of using my savings?
Sapper
Ltd Co is more of a long term commitment due to the standing cost of running the company, paying for the accountant etc. So NO in that situation Ltd Co isn’t for you.
If you only want to work adhoc to top up your income, I suggest you do direct PAYE for agency (definitely no 3rd party payroll), holiday cover for firms who know you or cash in hand. That way you will get the nett pay without the hassle
sapper:
Sorry for hijacking the thread, but I have a question please, I am at retirement age and just working in my jop until a new guy is found to take over the vehicle, if I wanted to work say, a week or so a month for an agency, would I be better off, for a simple life, to go Ltd, I wouldn’t need holiday pay or pension contributions as I get my full state pension now anyway and I don’t pay NI because I am retirement age, but just to boost income to go on holiday instead of using my savings?
Sapper
No, the simple way is PAYE. If you go Ltd you’ve got to do invoicing, keep a set of accounts, get them signed off by an accountant, do tax returns etc. With PAYE you turn up, go to work, get paid. You won’t pay any national insurance if you’re over the state retirement age. Holiday pay is a statutory entitlement so why not get paid when you’ve gone on holiday?
