December 14, 2017 at 9:56 am #376
I’m trying to get as much info as possible before OH speaks to accountant (who is proving elusive) and before he accepts the job he’s been offered. I’m trying to work what you have to pay as a self employed – limited company or LLP, depending on elusive accountant’s advice – that might overlap or differ from being an employee.
I’ve thought of tax, National insurance, health insurance, possibly work related insurance but not quite sure on that one, travel (car, petrol and parking etc) accommodation costs, pension contributions and smaller stuff like food when staying away. Are the any glaring omissions?
December 14, 2017 at 9:57 am #377
A few that spring to mind
Home office type costs even if it’s just for admin and invoicing so stationery, computer and software, telephones, printers etc.
Travel insurance. Assume it’s just UK as you said car so doesn’t need to think about visas, passports etc
Bank charges if there’s a business account.
Any accountancy or other professional fees.
Liability insurance and/or professional indemnity – depending on the type of work done.
Does he need membership of any professional bodies for his trade?
Tools or equipment needed
December 14, 2017 at 9:57 am #378
Thank you 🙂
There are some things there I’d not thought of. I’ll add them to my list. I really want him to go into this with his eyes open as it will be a big change for him and I think he’ll be surprised (shocked?!) when he has to pay for his own laptop and mobile, to name but two things your reply has made me think about.
December 14, 2017 at 9:58 am #379
From someone who is ‘in business’ and has been throughout the last fifteen years employed, self employed and latterly ending up the director of my own limited company, utilizing two different ‘trading names’, there are a lot of different aspects to your question(s).
Self employed as a ‘sole trader’ is the simplest form, ie you work literally for yourself, all the money left in the bank account at the end of the tax year COULD in theory be taken by yourself and indeed the Inland Revenue assumes that this is what you will do and taxes you likewise (that is if the sum is over your tax free personal allowance of course).
IF the business folds owing money, you will be PERSONALLY liable for all debts as they are in your name.
Limited companies work differently two reasons, the tax reasons USED to be the main one – although this has been diluted in recent budgets. Basically by paying yourself in a combination of ‘salary and dividends’ it used to be possible to either avoid or significantly reduce your personal tax liability.
Put simply the ‘salary’ could be taken as a tax deduction from the company, which would reduce its liability for tax and then dividends could be taxen from the remaining profit at no personal tax liability. This is still possible but no where near as lucrative as it used to be.
There are advantages however as any debts owing if the business folds are to the business and if it folds with (or has no) assets, the liabiity stops there and doesn’t attach to you personally.
Your husband will need a different bank account whichever route he takes – it will either need to be a ‘Sole trader account’ or a ‘Limited company account’ – you cannot (or shouldn’t) use a normal personal bank account to conduct business affairs through.
He will need business insurance for whatever he is doing.
Need to inform vehicle insurance companies etc of change from employed to self employed – indeed esp if not previously insured for business use.
JUST a side note – avoid elusive accountants (unless you know they are good, I had issues with one that led to my company sending them a ‘vote of no confidence’ letter (ie we fired them!). Their mistakes, poor accounting and general incompetence made this years tax affairs and nightmare.
If you think of anything else or just want a sanity check on anything (I know it gets confusing!) – feel free to drop me a PM and I will help if I can.
December 14, 2017 at 10:00 am #381
Thanks for taking the time to write such a detailed reply @sar
The accountant has been recommended to us by someone who works in finance so we are hoping he’s good but since he’s not been in touch yet it’s hard to say
I was self employed myself in the past but the accountant wasn’t great so not using him again. I was a sole trader so things were quite simple but OH would be contracting, I forgot to say that. Not sure if that makes any difference?
December 14, 2017 at 10:01 am #382
I have been contracting for a number of years.
Best route is for your OH to set up a limited company – in the contract world most companies don’t like dealing with sole traders. Set up isn’t expensive. When you do the set up divide the shares between yourself and OH – you can both take dividends which reduces the tax burden.
Look for a bank that offers free banking – many do 2 years, at the end of the free banking period move the account.
Get the contract reviewed before signing to check for IR35 status. I get my insurance from Qdos who are pretty good.
Take advice regarding VAT registration – I’m on a fixed rate, which means 1 charge @20% and pay 14.5%.
My salary is £680 per month, which means that it is below my personal tax allowance and isn’t subject to NI
Outgoings – quarterly VAT, yearly Corporation tax – this will be due 9 months after your end on tax year. 20% of profit. Monthly accountant fee.
Things you can claim – subsistence (up to £5 per day) milage, use of home as an office, telecoms.
Going contracting was the best thing I ever did – and will not go back to permanent employment again.
December 14, 2017 at 10:04 am #384
@ester We didn’t, just employee a new one and they contacted old one and got the paperwork from them directly. We went through two in quick succession which I was worried looked bad, but have been with current one for a number of years.
Limited v sole trader depends on how much your turnover is. We started out as sole trader, then went limited. We pay less tax as a limited company but more accountancy charges so if the turnover was quite low we wouldn’t save anything. A good accountant will know which is best.
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