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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13657
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I have the option next year of working for another employer.

Customer Question

I have the option next year of working for another employer. Instead of being paid a wage, I will be paid a monthly fee, so in effect I think I will be self employed. It will be around £80,000 so £6667 per month. Can you confirm if I am classed as self employed, and how much tax would I need to pay. Also what is the effect on national insurance. I know I will pay national insurance on profits but profits would be just my salary. Would the profit be pre or post tax? This is the first time I have had to think of this so it may sound very basic, so I am grateful for any help
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
First you should be aware that its not a matter of choice whether you are employed or self employed but a matter of laws, and the way in which you are engaged to undertake the work, determines whether you should be still an employee.
I have added a link here regarding employment status.
http://www.hmrc.gov.uk/employment-status/
If it is established that you can be self employed, then you register with HMRC - I have added a link here for you to do this.
Once registered you pay 2 lots of National Insurance (which cost in total a little less than the Class 1 National Insurance as an employee)
There is Class 2 National Insurance, which you pay by monthly direct debit or quarterly - and once you register you are then offered the option, as to which one you wish to undertake.
Class 2 National Insurance costs £2.75 a week.
Then there is Class 4 National Insurance is calculated the same time as your tax.
I have added a link here regarding the thresholds and rates of these National Insurances as a self employed individual
https://www.gov.uk/self-employed-national-insurance-rates
Your profits as you quite rightly state - will then be the fees you receive each month, - you just then need to consider any expenses you incur - such as any business travel, admin costs, advertising, tools to undertake your trade -
Link here that details the types of expenses you might incur
https://www.gov.uk/expenses-if-youre-self-employed/overview
After the first 5th April from commencing self employment, HMRC issue you with a self assessment tax return to declare the income and expenses, they then calculate the tax due, and any Class 4 National Insurance.
The threshold for tax is the same as for an employee, but I have added a link here that details this, and Class 4 National Insurance is advised in the link provided above.
https://www.gov.uk/government/publications/rates-and-allowances-income-tax/rates-and-allowances-income-tax
Basically the first £10,000 tax free, the next £31865 at 20% and anything between £41865 and £150,000 at 40% - then anything over £150,000 at 45%
Ant tax and Class 4 due, is then payable to HMRC no later than the following 31st Jan (which is calculated from the information you have provided in the self assessment tax return. if you file the return online this calculates it for you, if you fill in a paper return - HMRC calculate this for you .
Usual deadline for the online tax return the 31st Jan after the tax year has ended, or the paper return 31st Oct after the tax year has ended
So if you start self employment Jan 2015, the tax year ends 05/04/2015 - the tax return is issued after 05/04/2015, if filing a paper return back to HMRC by 31/01/2015, if filing online 31/01/2016. Any tax and National Insurance due paid no later than 31/01/2016.
The tax and National Insurance (Class 4) are both on the net profits (so total income less expenses)
So for example, net profits £30,000
Tax less personal allowances £10,000 - leaves £20,000 considered for tax (20%)
For Class 4 National Insurance - exempt amount £7956, leaves £22044 to be considered for Class 4 National Insurance (9%)
Let me know if you wish me to expand on any of the information provided.
Thanks
Sam
Customer: replied 1 year ago.

Hi Sam, appreciate your reply. I know its not a choice being self employed or not, that is the issue . The work I will do is sales but I will be paid a fee per month for consultancy services so I would summise from that that that i will be classed as self employed. I would go from being classed as an employee working for a company that does tax etc for me to a Consultant so hence this is all new. The other point I would ask you to consider is the use of a car. The car lease would be around £500 per month. It would not be a company car. Could you tell me how this would affect tax etc. Would the £500 be classed as an expense ? My contract has a clause i can claim back from the company is 0.25p per kilometre ( I will convert this to miles! I would use it for my private miles as well. Can you advise me on this, up to now I have had a company car which is taxed on co2 etc and I pay for my own private miles. I am really sorry to sound thick, this is a big step for me and I need to get it right, many thanks

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
As this is a new topic, from your original post, as per Just Answer policy- this would really need to be listed as a new question but as this is your first time on Just Answer, I will advise if you can claim back an amount from the company for the use of a car, and you being in sales, this will be your sole "customer" you will in fact be an employee, and this is then an issue - even though you do not feel it is.
As you will one assumes, use their client base, and be selling their product, purchases will go through this company, be paid mileage, not be in a position where you could make a loss - just tread carefully with taking this forward as self employment.
If employment you can only claim back from HMRC up to 45p a business mile for the first 10,000 miles and then 25p a mile (less any employer payments)
As a self employed individual then you can claim the business use of the lease of the vehicle and the above mileage rates for business miles, less the amount paid by the company (although it would be better that they paid you nothing, to sever the link between this supposedly being self employment)
So you would need to keep a note of total mileage and business mileage to establish the business usage.
If you have any new topics or wish to expand on the car situation further, then this will need to be listed as anew question or I can send an additional services request - with a recommended fee for the further Q & A topic.
But IN the meantime, it would be appreciated, if you could rate (or accept) the answers provided, as this ensures that Just Answer credit me for my time
Thanks
Sam
But if you are intent on accepting this is self employment
Customer: replied 1 year ago.

Thanks Sam, really appreciate your help!,

Expert:  Sam replied 1 year ago.
Hi mark
You are most welcome and good luck with this new venture, and if you need any further help along the way, do come back to Just Answer, and if you would like me to help, then just ask for Sam Tax in your opening post. (if another expert picks up the question by mistake, you can ask that you wait for me to respond, as Im online every day)
Enjoy the rest of the week
Thanks
Sam
Expert:  Sam replied 1 year ago.
HI Mark

It would be appreciated if you could rate the level of service I have provided, as this ensures I am credited by Just Answer for my time


Thanks

Sam

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