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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 13313
Experience:  International tax
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I am seeking advise con behalf of my brother in law. He currently gets paid PAYE, but has the option of going self employed, still contracting for the same business. He is unsure which the best solution will be for him in terms of tax and take home pay, Ie to stay PAYE and take a reduced wage, or maintain his current day rate and register as self employed. This is new to him and so I am trying to seek advice as to which would be the best option? If it were to be self employed, then what percentage of income would need to be set aside for NI/ Tax deductions etc?
From my understanding he will need to register for CIS and UTR Number, any help and or links to these forms would also be appreciated.
I look forward to your reply.
Many Thanks
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
Hello and thank you for allowing me to assist you.
The main difference is that self employment tax (or sole trader tax) is paid on profits after costs. The costs of doing the business could lower the actual taxable amount.
He’ll register for Self Assessment tax returns and Class 2 National Insurance at the same time. You usually pay 2 types of National Insurance if you’re self-employed:
Class 2 if your profits are £5,965 or more a year (Rate is £2.80 a week
Class 4 if your profits are £8,060 or more a year (Rate is 9% on profits between £8,060 and £42,385 and 2% on profits over £42,385)
You pay Class 2 and Class 4 National Insurance through Self Assessment. How much tax you pay depends on the Income Tax band you’re in. You need to pay your Self Assessment tax bill by midnight on 31 January (following the tax year you’re paying for).
The best place to start would be the following url:
https://www.gov.uk/set-up-sole-trader/register
The above is for registering. On that page you will see the links to go directly to registering. This includes NI as well as the UTR.
CIS registering is separate. Here is that url:
https://www.gov.uk/what-you-must-do-as-a-cis-contractor
I sincerely ***** ***** above is helpful but it appears you have researched so much yourself already.
Customer: replied 1 year ago.

Many Thanks,

He has been offered a day rate of £110.00 Self employed, and £81.00 PAYE

My understanding is that financially, the self employed option will be best?

Expert:  TaxRobin replied 1 year ago.
As he would be allowed to use expenses I am in agreement with you.
Customer: replied 1 year ago.

Ok,

Could you help to provide a break down of the monthly and or yearly deductions based on the £110.00 day rate?

Expert:  TaxRobin replied 1 year ago.
He will have various running costs. He can deduct some of these costs to work out his taxable profit as long as they’re allowable expenses.
HMRC has a partial list (general items) that are deductible:
office costs, eg stationery or phone bills
travel costs, eg fuel, parking, train or bus fares
clothing expenses, eg uniforms
staff costs, eg salaries or subcontractor costs
things you buy to sell on, eg stock or raw materials
financial costs, eg insurance or bank charges
costs of your business premises, eg heating, lighting, business rates
advertising or marketing, eg website costs
There is a simpler method for claiming some expenses. Simplified expenses are flat rates that can be used for:
vehicles
working from home
living on your business premises
His tax is going to be determined after expenses. Here is a calculator that will allow you to look at the actual income he will have based on real profit:
http://www.uktaxcalculators.co.uk/
Expert:  TaxRobin replied 1 year ago.
Wanted to touch base with you and make sure all worked out.
Customer: replied 1 year ago.

Hi There,

I am not particularly impressed that the money has left my account without feeling I had been helped 100%

I feel I had the information myself and you merely provided links to look at.

I would not recommend this service if you take payment before feedback is given, and before I have finished asking all questions.

I shall be disputing this

Expert:  TaxRobin replied 1 year ago.
I sent your posted concern to customer support.
I hope they were able to assist you.
I have not been compensated and was always available to answer more questions you had even those beyond the scope of the original post.

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