Self Employment in the UK - Some Questions from a noob
October 14, 2015 7:05 AM Subscribe
I have applied for a job which will mean I will be self employed and have some questions about it. Please help this Noob navigate these waters...
(The job is delivering vans to various places for a local company.)
Here are the questions:
I tried to find out how much insurance would cost, but no-one seemed to offer it or know what I was talking about, so am I responsible for insurance, or is the company that owns the vans?
I work part time and wondered how that works in regards to calculating tax?
Can I pay into a private pension? Does this come out before tax?
Can I pay into savings accounts (ISA/Bond/Savings Account) and how does this work taxation wise?
How easy to complete is the self-assessment taxation form and should I get an accountant to help with this?
I am informed that the self-assessment form has to be completed before the end of January, but the tax year runs to the beginning of April, so am I working things out Jan-Jan, and if not, do I estimate income for Feb-April?
How easy is it to set up? (I looked up some info on the UK's .gov website and there was a link to set up and register as self-employed with the tax office, although I didn't click it as I haven't got the job yet.)
What sort of things count towards business costs, and how does that work taxation wise?
Any other advice or information you feel relevant to this situation would be appreciated.
(The job is delivering vans to various places for a local company.)
Here are the questions:
I tried to find out how much insurance would cost, but no-one seemed to offer it or know what I was talking about, so am I responsible for insurance, or is the company that owns the vans?
I work part time and wondered how that works in regards to calculating tax?
Can I pay into a private pension? Does this come out before tax?
Can I pay into savings accounts (ISA/Bond/Savings Account) and how does this work taxation wise?
How easy to complete is the self-assessment taxation form and should I get an accountant to help with this?
I am informed that the self-assessment form has to be completed before the end of January, but the tax year runs to the beginning of April, so am I working things out Jan-Jan, and if not, do I estimate income for Feb-April?
How easy is it to set up? (I looked up some info on the UK's .gov website and there was a link to set up and register as self-employed with the tax office, although I didn't click it as I haven't got the job yet.)
What sort of things count towards business costs, and how does that work taxation wise?
Any other advice or information you feel relevant to this situation would be appreciated.
How easy to complete is the self-assessment taxation form and should I get an accountant to help with this?
If your tax affairs are simple, then it is pretty simple. If this is your only job (or if your other job is PAYE and sorted out for you), if you are not running the company, if you are not employing anyone, if you do not have significant investments, if you have a single simple pension, if you are not interested in doing things that minimise your tax burden e.g. writing stuff off in a complicated way/using charitable donations/yadda, then you can absolutely do it yourself. Even if one or more of these things apply, you can still do it yourself although it will be a day or two's work and you will swear a lot and have to read annoying documentation.
I am not, however, necessarily advising you to do it yourself. I choose to because my affairs are pretty simple and the extra money I make as a self-employed person is not enough to pay for an accountant or make one worthwhile, and because I am solvent and socialist enough not to care about minimising my tax burden. YMMV.
I work part time and wondered how that works in regards to calculating tax?
Can I pay into a private pension? Does this come out before tax?
Can I pay into savings accounts (ISA/Bond/Savings Account) and how does this work taxation wise?
Bundling these together because these *are* questions I'd pay an accountant to answer for me, as the answer is often 'it depends on your exact circumstances'. I'd be more inclined to get an accountant to explain this to me, and help me with my forms the first year, and then try to do it myself afterwards.
But generally:
being part time makes no difference, the tax bands kick in at the same income level;
yes you can, it'll be before tax as you'll pay tax in arrears, but you will get tax relief on it (I don't know how much);
yes you can - for an ISA as long as you stay under the maximum amount of £ per year the interest is tax free.
How easy is it to set up? (I looked up some info on the UK's .gov website and there was a link to set up and register as self-employed with the tax office, although I didn't click it as I haven't got the job yet.)
Pretty easy although there are approximately seven billion stages*. It is just a case of clicking the link, waiting for a code in the post, putting the code in, waiting for a password in the post, etc.
* Ok, about three, but it can take weeks so start well in advance of the submission deadline!
What sort of things count towards business costs, and how does that work taxation wise?
Again, this might be a job for the accountant, but there is actually pretty good guidance on this attached to the online self-assessment tax form. Generally, anything you spend on 'work related expenses' is not counted as net income for the purpose of taxation (roughly speaking); what counts as a work related expense does vary (e.g. if its a computer, you have to figure out how much you'll use it for work vs. home use, and only the % value for work use counts, etc) but I've always found the guidance pretty straightforward.
I am informed that the self-assessment form has to be completed before the end of January, but the tax year runs to the beginning of April, so am I working things out Jan-Jan, and if not, do I estimate income for Feb-April?
Self-Assessment tax is paid in arrears: that means by Jan 2016 you have to submit a return for the Tax year April 2014-April 2016. If you get this job you won't have to do anything until Jan 2017 (although I'd recommend registering asap, and not waiting until Jan to do it - I did my tax return for 2014-15 a few weeks ago, so now I know how much tax I owe, but have until Jan to pay).
posted by AFII at 7:32 AM on October 14, 2015
If your tax affairs are simple, then it is pretty simple. If this is your only job (or if your other job is PAYE and sorted out for you), if you are not running the company, if you are not employing anyone, if you do not have significant investments, if you have a single simple pension, if you are not interested in doing things that minimise your tax burden e.g. writing stuff off in a complicated way/using charitable donations/yadda, then you can absolutely do it yourself. Even if one or more of these things apply, you can still do it yourself although it will be a day or two's work and you will swear a lot and have to read annoying documentation.
I am not, however, necessarily advising you to do it yourself. I choose to because my affairs are pretty simple and the extra money I make as a self-employed person is not enough to pay for an accountant or make one worthwhile, and because I am solvent and socialist enough not to care about minimising my tax burden. YMMV.
I work part time and wondered how that works in regards to calculating tax?
Can I pay into a private pension? Does this come out before tax?
Can I pay into savings accounts (ISA/Bond/Savings Account) and how does this work taxation wise?
Bundling these together because these *are* questions I'd pay an accountant to answer for me, as the answer is often 'it depends on your exact circumstances'. I'd be more inclined to get an accountant to explain this to me, and help me with my forms the first year, and then try to do it myself afterwards.
But generally:
being part time makes no difference, the tax bands kick in at the same income level;
yes you can, it'll be before tax as you'll pay tax in arrears, but you will get tax relief on it (I don't know how much);
yes you can - for an ISA as long as you stay under the maximum amount of £ per year the interest is tax free.
How easy is it to set up? (I looked up some info on the UK's .gov website and there was a link to set up and register as self-employed with the tax office, although I didn't click it as I haven't got the job yet.)
Pretty easy although there are approximately seven billion stages*. It is just a case of clicking the link, waiting for a code in the post, putting the code in, waiting for a password in the post, etc.
* Ok, about three, but it can take weeks so start well in advance of the submission deadline!
What sort of things count towards business costs, and how does that work taxation wise?
Again, this might be a job for the accountant, but there is actually pretty good guidance on this attached to the online self-assessment tax form. Generally, anything you spend on 'work related expenses' is not counted as net income for the purpose of taxation (roughly speaking); what counts as a work related expense does vary (e.g. if its a computer, you have to figure out how much you'll use it for work vs. home use, and only the % value for work use counts, etc) but I've always found the guidance pretty straightforward.
I am informed that the self-assessment form has to be completed before the end of January, but the tax year runs to the beginning of April, so am I working things out Jan-Jan, and if not, do I estimate income for Feb-April?
Self-Assessment tax is paid in arrears: that means by Jan 2016 you have to submit a return for the Tax year April 2014-April 2016. If you get this job you won't have to do anything until Jan 2017 (although I'd recommend registering asap, and not waiting until Jan to do it - I did my tax return for 2014-15 a few weeks ago, so now I know how much tax I owe, but have until Jan to pay).
posted by AFII at 7:32 AM on October 14, 2015
Can't answer all your questions but regarding the tax year - you have until January 2016 to submit your tax return for april 2014-april 2015, you can submit it as early as april 2015. I always do mine as soon as possible then I know asap how much I owe and have all that time to make sure I've got the money!
Registering was easy - IIRC there was just a form to fill in and send off. Self-assessment is pretty easy unless you have a very complicated business or tax situation. There is a section for you to fill in your PAYE details and tax already paid from your other job.
You can pay into whatever savings account you like, its your money. You will be asked about how much interest you earned when you fill in your self assessment tax return,
posted by missmagenta at 7:35 AM on October 14, 2015
Registering was easy - IIRC there was just a form to fill in and send off. Self-assessment is pretty easy unless you have a very complicated business or tax situation. There is a section for you to fill in your PAYE details and tax already paid from your other job.
You can pay into whatever savings account you like, its your money. You will be asked about how much interest you earned when you fill in your self assessment tax return,
posted by missmagenta at 7:35 AM on October 14, 2015
dammit all, that should read 'Tax year April 2014-April 2015' in the last paragraph.
posted by AFII at 7:42 AM on October 14, 2015
posted by AFII at 7:42 AM on October 14, 2015
I work at a UK company that makes accounting software for freelancers, and my job is to write helpful guides for people like you - hello!
For Self Assessment, hopefully you'll find this useful (PDF link). It's a guide that starts with the basics of "Do I need to file and when?" and takes you through the whole process of registering, preparing, and filing.
We also have a blog post about working for yourself while also staying employed that might be useful.
We also have a guide for different costs and whether you can claim tax relief on them (PDF link) - i just double-checked and it has a section on pensions as well as bank interest and charges.
Finally, our Chief Accountant holds a weekly drop-in Q&A on Wednesday mornings in Facebook where she just answers questions that people may have - that link goes to the one she held this morning. She would always recommend that you engage your own accountant, but it's a super-handy resource to have, especially if you're just starting out.
posted by ukdanae at 8:16 AM on October 14, 2015 [4 favorites]
For Self Assessment, hopefully you'll find this useful (PDF link). It's a guide that starts with the basics of "Do I need to file and when?" and takes you through the whole process of registering, preparing, and filing.
We also have a blog post about working for yourself while also staying employed that might be useful.
We also have a guide for different costs and whether you can claim tax relief on them (PDF link) - i just double-checked and it has a section on pensions as well as bank interest and charges.
Finally, our Chief Accountant holds a weekly drop-in Q&A on Wednesday mornings in Facebook where she just answers questions that people may have - that link goes to the one she held this morning. She would always recommend that you engage your own accountant, but it's a super-handy resource to have, especially if you're just starting out.
posted by ukdanae at 8:16 AM on October 14, 2015 [4 favorites]
Maybe you don't have to be self-employed. When I was a contractor in London, I used Contractor Umbrella. In simple terms, they act as an employer, hiring you out to the people who are actually paying you. All your tax hassles are taken care of, and if you have any problems they provide support. Personally, I'd recommend them; and I've never heard a bad word about them from anybody else who used them.
(I've got no stake in Contractor Umbrella - just a satisfied customer.)
posted by veedubya at 11:21 AM on October 14, 2015 [2 favorites]
(I've got no stake in Contractor Umbrella - just a satisfied customer.)
posted by veedubya at 11:21 AM on October 14, 2015 [2 favorites]
Similar to veedubya, during a period of self-employment I used a company called Champion Contractors, who acted as an umbrella employer and sorted out the tax / NI side of things.
I also recommend reading up about the various classes of National Insurance you might be liable for if you are self-employed. Not reading the form closely enough and not realising you are liable for Class 4 can be an embarrassing and financially awkward mistake. Ask me how I know ...
posted by Martha My Dear Prudence at 3:21 PM on October 14, 2015
I also recommend reading up about the various classes of National Insurance you might be liable for if you are self-employed. Not reading the form closely enough and not realising you are liable for Class 4 can be an embarrassing and financially awkward mistake. Ask me how I know ...
posted by Martha My Dear Prudence at 3:21 PM on October 14, 2015
Response by poster: Thanks everyone, will read through the links. I think I will be unable to use an umbrella company, though.
posted by marienbad at 4:38 AM on October 15, 2015
posted by marienbad at 4:38 AM on October 15, 2015
This thread is closed to new comments.
You might also look to see if these is a "Business Gateway" type of place in your area. Maybe these people in Leicestershire? There may be networks you could join and useful free sources of information.
The whole process is pretty easy to set up (compared to my experience of doing similar in France) - the most complex part is often setting up a suitable business banking account: quite a lot of paper work even if you have no intention of borrowing anything.
posted by rongorongo at 7:27 AM on October 14, 2015