I have very recently gone self employed and now work through various agencies and they very kindly give me a whole £1 extra per hour for me to spend, but what I really need to know is exactly what expences are tax allowable. I have got a accountant now but I need to know myself for instance…meal allowance per day…a fellow driver said I can claim £5 a day if I do 8hours another said its £10 a day and another said it £25 a day if I am doing night shifts. I look forward to lots of suggestions guys and thank you for your input.
I am a waste of skin:
I have very recently gone self employed and now work through various agencies and they very kindly give me a whole £1 extra per hour for me to spend, but what I really need to know is exactly what expences are tax allowable. I have got a accountant now but I need to know myself for instance…meal allowance per day…a fellow driver said I can claim £5 a day if I do 8hours another said its £10 a day and another said it £25 a day if I am doing night shifts. I look forward to lots of suggestions guys and thank you for your input.
Hope this helps -
Meal Allowance - If you work more than 5 miles away from your permanent address or temporary
workplace, you are entitled to claim for meals taken during the course of your working day on the
following basis (nothing required as proof for claiming this allowance)
- If you are away for less than 10 hours, you can claim only for lunch at a rate of £5.
- If you are away for more than 10 hours, then you can claim for lunch and either breakfast at
£5, or an evening meal for £5 as appropriate - If you are staying away over night, you can claim for all three meals at the £5 per meal.
NB: If you spend more than £5 and have a receipt, then you may claim the full amount spent. Please
note that HMRC carry out ‘compliance reviews’ in which they may check such evidence.
Please note if your accommodation receipt covers a meal too (for example bed and breakfast), then
you cannot claim a further £5 for that meal.
Daily Allowance - You can claim a 24 hours allowance for incidental expenses when you have to
stay away from your permanent address. This is paid at £5.00 per night away for stays in the UK and
£10.00 per night for stays abroad and in Ireland. If you are staying with relatives or friends, you can
still claim this 24 hours allowance. Nothing required as proof for claiming this allowance.
wouldn`t it be easier to ask the accountant … 
peirre:
wouldn`t it be easier to ask the accountant …
The problem with “asking the accountant” is most will want to charge for the “consultation” if you are not already their customer (…and sometimes if you are too!)
For outsiders looking in, investigating the pros and cons of going SE over PAYE, you need to know the full aspects of:-
“Why £1 an hour extra makes up for losing over £1500 a year in holiday pay, many rights to benefits if the work dries up, and sick pay.”
I’m not sure if having children has an effect positive or negative on what SE can claim as extra tax allowances against what the PAYE bod can claim as straight-up tax credits.
Answers on a postcard please!
I found it was only worth going SE if you can bill for £18ph (I work weekends) no quibble. For midweek rates though, this could drop down to 14-15ph for those of you that prefer working during the week.
Thus, “£10ph marked up to £11ph” doesn’t cut it. 
You are classed as a commercial traveller, So all your meals are tax deductable.
The easiest thing to do is a deal with HMRC.
Absorb all daily expenses into your subsistance living allowance (night out money). The present rate is simply an agreement between HMRC and the RHA. I used to set mine at about £35 to £36 per day.
They are very easy to deal with nowadays. If you are willing to simplify things and give them less work to do, Then they will make a deal with you.
Why have you got an accountant?
Take a look at a tax return, There’s no need for accountants for the self employed nowadays. It’s a five minute job.
limeyphil:
You are classed as a commercial traveller, So all your meals are tax deductable.
The easiest thing to do is a deal with HMRC.
Absorb all daily expenses into your subsistance living allowance (night out money). The present rate is simply an agreement between HMRC and the RHA. I used to set mine at about £35 to £36 per day.
They are very easy to deal with nowadays. If you are willing to simplify things and give them less work to do, Then they will make a deal with you.
Why have you got an accountant?
Take a look at a tax return, There’s no need for accountants for the self employed nowadays. It’s a five minute job.
I am being charged by the tax man over £3,000 for 5 years worth of night out allowance. He said the £25 I have been claiming is to much and he will only allow £20 per night. Do you think I could fight this? I am a self employed owner driver HGV with sleeper cab. I am out 4 or 5 night every week.
Winseer:
peirre:
wouldn`t it be easier to ask the accountant …The problem with “asking the accountant” is most will want to charge for the “consultation” if you are not already their customer (…and sometimes if you are too!)
For outsiders looking in, investigating the pros and cons of going SE over PAYE, you need to know the full aspects of:-
“Why £1 an hour extra makes up for losing over £1500 a year in holiday pay, many rights to benefits if the work dries up, and sick pay.”
I’m not sure if having children has an effect positive or negative on what SE can claim as extra tax allowances against what the PAYE bod can claim as straight-up tax credits.
Answers on a postcard please!I found it was only worth going SE if you can bill for £18ph (I work weekends) no quibble. For midweek rates though, this could drop down to 14-15ph for those of you that prefer working during the week.
Thus, “£10ph marked up to £11ph” doesn’t cut it.
there are pros and cons other than cash in pocket
peirre:
wouldn`t it be easier to ask the accountant …
Many accountants aren’t actually that good at tax. Being an accountant is like being a lawyer - there’s lots of different specialisations.
A friend of mine who specialises in tax spends a lot of her time sorting out the ■■-ups accountants who have no business doing company tax accounts have done. At one firm she went to they were losing £10,000s due to stuff not being applied correctly if at all.
lauralhardy:
I am being charged by the tax man over £3,000 for 5 years worth of night out allowance. He said the £25 I have been claiming is to much and he will only allow £20 per night. Do you think I could fight this? I am a self employed owner driver HGV with sleeper cab. I am out 4 or 5 night every week.
HMRC have set agreed rates for subsistence allowance with I think its the RHA. Anything over this is taxable but if its say £22 per day and you’ve claimed £25 then you’d only pay tax on £3.
scanny77:
there are pros and cons other than cash in pocket
What are the pros of getting paid £1/hr over PAYE and losing all rights as an employee?
Don’t tell me its because you can claim stuff against tax because you can claim virtually the same on PAYE.
Winseer:
Thus, “£10ph marked up to £11ph” doesn’t cut it.
Yes it does, if you look at the whole picture.
The “£1 per hour extra isn’t enough to offset what you lose” brigade are only looking at part of the picture.
Lets say for example you’re on £10/h PAYE, averaging 40h/week, so that’s £400/week or £20800 over the course of a year. According to listentotaxman.com that would give you a take home over the year of just short of £17k. You of course will get 4 weeks paid holiday in with that.
Now let us consider the same 40h/week at £11/h working S/E. I’ll assume for my example it is S/E as a limited company as that is what I am and therefore the option I understand best.
The top line will be 48 weeks at 40 hours at £11/hour (only 48 weeks as you want your 4 weeks holidays). So the top line is £21120.
Of course you’ll be registered for VAT on the flat rate scheme, which effectively boosts that by a further 8%. So now you’ve earnt about £22800.
Out of that £22800 I’m going to assume you spend the £800 on accountancy and other fees through the year (in practice it should be a lot less than this). That leaves you £22000 to take for yourself.
To simplify things the only tax free expense I’m going to consider at this stage is mileage payments. I’m not going to consider meal allowances or any of the other allowable expenses at this stage. I’ll assume for those 48 weeks you’re averaging 4 days a week working 15 miles from home, which works out to 5760 miles each year that you can claim tax free at 45p/mile, which is about £2600/year into your pocket.
That’s leaving about £19400 in the company bank account for the year.
You pay yourself a nominal salary, lets say you pay yourself £7k/year. No PAYE tax or NI is due on this as you’re below the thresholds.
That’s leaving £12400 in the company bank account for the year. This is your “profit” which is taxable at the small companies rate of 20%, which means a tax bill of about £2500. The remaining £9900 is yours to take as a dividend.
So the total in your pocket is £2600 (expenses) + £7000 (salary) + £9900 (dividend) = £19500.
That’s £2500/year more than if you were working on PAYE at £10/hour, or an effective pay rise of nearly 15%.
That works out to an extra £50/week in your pocket, even though throughout the example all the assumtptions I’ve made have been on the pessimistic side. Most people will work more than 40h/week, for example (doing the whole lot again for 50h/week and assuming time and a half over 40h gives a difference of £4100/year or nearly £80/week). Most people will also claim lots of other allowable expenses such as meal allowances and use of the home as an office. Most people will pay a lot less than £800/year for their accountancy (mine is under half that).
I hope that helps dispel the myth that “£1/hour extra isn’t enough”. For me an extra £50-80/week for doing an hour of paperwork each week would easily be worth it. Plus of course once you have your limited company you can go round some local hauliers and try and sell yourself to them directly at a lot more than £1/hour extra.
Paul
repton:
Winseer:
Thus, “£10ph marked up to £11ph” doesn’t cut it.Yes it does, if you look at the whole picture.
The “£1 per hour extra isn’t enough to offset what you lose” brigade are only looking at part of the picture.
Lets say for example you’re on £10/h PAYE, averaging 40h/week, so that’s £400/week or £20800 over the course of a year. According to listentotaxman.com that would give you a take home over the year of just short of £17k. You of course will get 4 weeks paid holiday in with that.
Now let us consider the same 40h/week at £11/h working S/E. I’ll assume for my example it is S/E as a limited company as that is what I am and therefore the option I understand best.
Ltd co, yes. Brolly, no - £1 extra is not going to cut it.
What if you get the mileage & subsistance on PAYE without having to join the umbrella or go self employed, because you’re not intending to be working 5-6-5-6 all the time? I sat down and worked out that for my personal circumstances, I’d have to work an average of 43.2 hours a week EVERY week (ie not counting for holidays) to make £1ph “extra” make a difference to having to cough up for accountants, and the other expenses that I just don’t have on PAYE… I guess the main horse for course here is about how many hours are being put in, rather than just chasing the higest hourly rate one can get for as few hours as possible?
In the interesting calculations above i see no mention of national insurance deductions, probably included in the figures given for PAYE.
But over the long term, what if any payments are you who opt for SE making to guarantee at least the standard state pension…with its ever shifting goal posts, do the calculations from Repton above include this.
I know some of you who work for smaller companies under PAYE may well end up having to ‘‘opt out’’ of the supposedly compulsory pension schemes due soon, possibly under unscrupulous pressure from your bosses…i already know one small operator who has threatened to shut up shop if his handful of drivers don’t opt out when push comes to shove, but what implications for the SE, those in full time jobs should effectively be getting a pay rise by contributions their employers will have to make.
Yes i have no doubt the whole thing is another bloody vote winning sham and the goal posts will shift countless times before those in power finally admit the money has run out and we’re getting bugger all when our time comes.
My accountant has not been worth the effort, he has been no help with the HMRC thats for sure. I am now dealing with them direct. He said I cannot claim mileage allowance unless it is for going to get parts for the truck. Cannot claim for going to and from the yard where I keep truck. And this night out allowance problem is a nightmare, accountant said I should just pay it. Trouble is the overdraft will not take any more!
lauralhardy:
My accountant has not been worth the effort, he has been no help with the HMRC thats for sure. I am now dealing with them direct. He said I cannot claim mileage allowance unless it is for going to get parts for the truck. Cannot claim for going to and from the yard where I keep truck.
He’s right, you cannot claim mileage allowance payments on commuting from your home to a regular place of work. From what you say I assume you are an O/D with your own vehicle and as such the yard where you park the vehicle will count as your normal place of work and as such you cannot claim.
The reason agency workers can claim is because they do not have a regular place of work and as such every trip to a clients site is eligible. That said, if as an agency driver you ever find yourself spending 40% or more of your working life at the same place then you can no longer legally claim for mileage to that client.
Paul
Juddian:
In the interesting calculations above i see no mention of national insurance deductions, probably included in the figures given for PAYE.But over the long term, what if any payments are you who opt for SE making to guarantee at least the standard state pension…with its ever shifting goal posts, do the calculations from Repton above include this.
As long as you pay yourself a salary of at least £5668 per year you’ve above the NI “Lower Earnings Limit” which gets you your stamp towards you state pension. I used £7000 in my example so that covers this. You don’t actually have to pay any NI until you go above the “Primary Threshold” which is currently £7755 per year.
Paul
Winseer:
I sat down and worked out that for my personal circumstances, I’d have to work an average of 43.2 hours a week EVERY week (ie not counting for holidays) to make £1ph “extra” make a difference to having to cough up for accountants, and the other expenses that I just don’t have on PAYE
Clearly every situation is different and some will benefit more than others and it is clearly the case that the more hours you do the more you benefit as the fixed costs (accountancy being the main one) are diluted more.
I’m not sure what other expenses you would have on S/E over PAYE. All I can think of is the accountants bill and your annual return to companies house which is £13 if you do it online.
Paul
Thanks for that. Do you know anything about the night out allowance for self employed owner driver. Tax man has said that I have over £3000 plus pentalty to give them over it.
repton:
To simplify things the only tax free expense I’m going to consider at this stage is mileage payments. I’m not going to consider meal allowances or any of the other allowable expenses at this stage. I’ll assume for those 48 weeks you’re averaging 4 days a week working 15 miles from home, which works out to 5760 miles each year that you can claim tax free at 45p/mile, which is about £2600/year into your pocket.
You can claim that as PAYE as well.
That’s £2500/year more than if you were working on PAYE at £10/hour, or an effective pay rise of nearly 15%.
That works out to an extra £50/week in your pocket
No it doesn’t. For a start the agency driver can also claim mileage which you already said was £2600 so you’ve just admitted they’re already £100 a year better off than you.
If they’ve a jumper which says “Driver Hire” or whatever on, they can claim for washing their work clothes as well. In fact there are very few tax deductions you make which they cannot claim. You also mentioned making sure that you pay yourself above the lower NI threshold. That means you’ll be also paying employers NI as well.
And you’re assuming you don’t have to take time off work ill. If the employee is ill they get SSP. You get SSP but you have to pay yourself it from your Ltd Company and then reclaim it back from the govt which I doubt you’re likely to do.
In short, the only reason you’re ahead at all is because of the flat rate VAT scheme and if HMRC ever clock onto it being used as a scam, your advantage disappears in smoke.
Put it this way. If the true costs to an employer paying someone £10/hr are more than £1/hr above that, how are you not being taken for a mug? Fact is you are being taken for a mug and its only by jumping through a load of hoops and in your own mind ignoring the fact an agency driver can claim many of the things you are that you’ve convinced yourself they’re not having you for a right idiot.
And when it comes to wanting a loan for a new car or a mortgage, who do you think stands the better chance - someone with wageslips for £20,400 or someone with wageslips for £8,000? They won’t be interested in the dividends because the dividends are paid from post tax profits so no profit, no dividend.