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I currently get £23k a year on PAYE as a salary. I'm leaving my job due to work pressures. I am going to be working for anther company doing the same thing, but as a contractor. I will be getting £2000 a month exactly.

 

I am now trying to work out if I will be better off. Since I have just realized that I won't be getting holiday pay, meaning the 6 days I have booked off next month will mean I will lose close to £600! Someone else I've spoken to seems to think you can claim back on many things you buy as a contractor, so would be better off?

 

Have I made a mistake?

 

P.S How bad would it be if I didn't declare taxes on the first payment?

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I currently get £23k a year on PAYE as a salary. I'm leaving my job due to work pressures. I am going to be working for anther company doing the same thing, but as a contractor. I will be getting £2000 a month exactly.

 

I am now trying to work out if I will be better off. Since I have just realized that I won't be getting holiday pay, meaning the 6 days I have booked off next month will mean I will lose close to £600! Someone else I've spoken to seems to think you can claim back on many things you buy as a contractor, so would be better off?

 

Have I made a mistake?

 

P.S How bad would it be if I didn't declare taxes on the first payment?

 

Consider not only annual leave, but sick pay too,

 

"£2000 a month" : but are you paid per hour? Per day? Per week? Per month??

 

"doing the same job"': are you really a contractor, or is this "disguised employment" - you are at risk of being hit by IR35, where you'll loose any advantages : you might even end off worse off

 

https://www.gov.uk/guidance/ir35-find-out-if-it-applies

 

As for "P.S How bad would it be if I didn't declare taxes on the first payment?"

Do you really expect CAG to support illegally not declaring income?

But, let's look at how bad it would be ..........

1) the usual time limits for HMRC to come after you for an error on your tax return don't kick in, so you'll never be able to think "they can't come after me for the tax, and interest" : they could, anytime

2) if they catch you, prepare to have an in depth investigation of your tax position going back a number of years : it might be the first time you tried to fiddle a return, but they'll take you back over previous years, and it'll feel like they are looking for the slightest error : because they will be!

3) Tax, a penalty, and interest on both , so if it is a few years down the line : rack up that interest!

4) IR35 : you've flagged yourself up for an IR35 investigation.

 

So, you'll end up paying the tax anyhow.

Likely they'll charge you interest too.

You may face an in depth investigation of your tax returns and IR35 status : loads of hassle, tons of paperwork, and the onus will be on you to prove you have behaved correctly

Is it really worth considering?

 

Why "paint a bullseye" on your back

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Consider not only annual leave, but sick pay too,

 

"£2000 a month" : but are you paid per hour? Per day? Per week? Per month??

 

"doing the same job"': are you really a contractor, or is this "disguised employment" - you are at risk of being hit by IR35, where you'll loose any advantages : you might even end off worse off

 

https://www.gov.uk/guidance/ir35-find-out-if-it-applies

 

As for "P.S How bad would it be if I didn't declare taxes on the first payment?"

Do you really expect CAG to support illegally not declaring income?

But, let's look at how bad it would be ..........

1) the usual time limits for HMRC to come after you for an error on your tax return don't kick in, so you'll never be able to think "they can't come after me for the tax, and interest" : they could, anytime

2) if they catch you, prepare to have an in depth investigation of your tax position going back a number of years : it might be the first time you tried to fiddle a return, but they'll take you back over previous years, and it'll feel like they are looking for the slightest error : because they will be!

3) Tax, a penalty, and interest on both , so if it is a few years down the line : rack up that interest!

4) IR35 : you've flagged yourself up for an IR35 investigation.

 

So, you'll end up paying the tax anyhow.

Likely they'll charge you interest too.

You may face an in depth investigation of your tax returns and IR35 status : loads of hassle, tons of paperwork, and the onus will be on you to prove you have behaved correctly

Is it really worth considering?

 

Why "paint a bullseye" on your back

 

I wasn't sure. But yes definitely I will be paying taxes on it.

 

£2000 a month. That's what was agreed. They said roughly £100 a day it will work out as.

 

I will be contracted up until they make me an employee since they have to sort things out.

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I wasn't sure. But yes definitely I will be paying taxes on it.

 

£2000 a month. That's what was agreed. They said roughly £100 a day it will work out as.

 

I will be contracted up until they make me an employee since they have to sort things out.

 

10 days leave (or sick) per year and you won't earn more than you do at present. Any other leave or sickness & you'll be worse off.

That is even before you consider the hassle (doing your own tax return, paying your own tax), though you might get some minor benefit in reduced NI, and / or increased allowance against tax (though they have tightened up on these!

https://www.gov.uk/expenses-if-youre-self-employed/overview

 

Reduced NI can bring its own woes : is there any risk you may need to rely on contribution based JSA (or other contribution based benefit), where reduced NI contributions could affect your entitlement?

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You can offset car/van mileage, electricity, gas, water at home if you do paperwork there, uniform, safety equipment, tools, lunches while at work and much more.

I found invaluable the advice of my accountant whose fees could also be offset.

I paid roughly £100/month for his services, but he saved me thousands on allowances that I couldn't even dream they existed

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You can offset car/van mileage, electricity, gas, water at home if you do paperwork there, uniform, safety equipment, tools, lunches while at work and much more.

I found invaluable the advice of my accountant whose fees could also be offset.

I paid roughly £100/month for his services, but he saved me thousands on allowances that I couldn't even dream they existed

 

Could I not do my taxes myself? I don't get much money spare as it is now, £100 a month more is going to make things worse for me. I thought it would be simple as money comes in, and I just declare it?

 

The office is 5 minutes drive from me, I will need to drive around the UK to see clients but have been told I will get 40p per mile for this, I guess this will be taxed too? There isn't really anything I need to buy for the job.

 

Thanks BazzaS, I'll have to read up to understand what you mean by Contribution based JSA, Thought you can only get it if you're unemployed.

 

Edit: Reading this online: https://www.gov.uk/understand-self-assessment-bill/payments-on-account Does this mean I will have to pay an extra 50% of my tax for the next year also? I'm left with £300 a month at the moment, I feel like this is going to be another downward spiral for me!

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Could I not do my taxes myself? I don't get much money spare as it is now, £100 a month more is going to make things worse for me. I thought it would be simple as money comes in, and I just declare it?

 

The office is 5 minutes drive from me, I will need to drive around the UK to see clients but have been told I will get 40p per mile for this, I guess this will be taxed too? There isn't really anything I need to buy for the job.

 

Thanks BazzaS, I'll have to read up to understand what you mean by Contribution based JSA, Thought you can only get it if you're unemployed.

 

Edit: Reading this online: https://www.gov.uk/understand-self-assessment-bill/payments-on-account Does this mean I will have to pay an extra 50% of my tax for the next year also? I'm left with £300 a month at the moment, I feel like this is going to be another downward spiral for me!

 

The tax return form that they use now is very complicated.

I use to do a spreadsheet with ins and outs years ago and that was accepted for small businesses, but not anymore.

The £100 investment in a good accountant is the best I've ever done because as said, there are a lot of things that can be deducted from small businesses accounts.

For example I didn't know that I could claim a percentage of electricity, gas and water from my house bills because I do paperwork at home.

A new laptop, printer, stationery, job specific clothing can all be offset and believe me they add up!

You'll end up paying very little tax if your accounts are done properly.

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Thanks BazzaS, I'll have to read up to understand what you mean by Contribution based JSA, Thought you can only get it if you're unemployed.

 

Clearly, JSA relates to if (in the future) you became unemployed and needed to claim. I'm highlighting it as at present you pay NI, which won't happen automatically and you'll need to factor in possible consequences to any future contribution based benefits / state pension.

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You should look carefully at the job, who you are working for and what they provide to you to determine whetehr you are really self-employed or employed. Just becasue they say that you are a contractor and self-employed doesnt mean it is true, they are most likely being lazy and abusing the current system.

When you go to work do they provide all of your work or can you do other work as well? do they provide somewhere for you to work? Do they provide the tools of the trade- ie if you are a software developer do they make you work on your own computer or theirs? If you have to make provision for all of these yoursel them you are self-employed, if they provide all of them then you are employed and they are dodging the truth and their responsibilities.

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You might think you'll struggle to find the money to pay an accountant every month, it's nothing compared to what not having one could cost you in the long run.

My accountant costs me £85 a month, for that I get my returns sorted, my vat, my payroll, accounts etc. I could probably do some of it myself but I'm paying for peace of mind, not to mention the advice etc.

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You should look carefully at the job, who you are working for and what they provide to you to determine whetehr you are really self-employed or employed. Just becasue they say that you are a contractor and self-employed doesnt mean it is true, they are most likely being lazy and abusing the current system.

When you go to work do they provide all of your work or can you do other work as well? do they provide somewhere for you to work? Do they provide the tools of the trade- ie if you are a software developer do they make you work on your own computer or theirs? If you have to make provision for all of these yoursel them you are self-employed, if they provide all of them then you are employed and they are dodging the truth and their responsibilities.

 

They haven't had an employee yet, there are three of them all own the company together. They don't have anything in place yet to pay me as an employee so have asked me to go contracted for the first few months. I am hoping it is only a few months. They have a new office they just opened near my flat, and they will be providing me with all the work.

 

Side note: My current employer want me to stay desperately, they have offered a 3k raise, although I don't think it is enough as they would want me to be a field engineer. They have also asked me to do work on the side for them for £90 a day.

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Have they issued a contract to you stating terms ?

 

You need to see this. From what i can remember when my Dad looked at becoming a contractor, rather than employed by a company, HMRC were not convinced he would be a self employed contractor. All of his work would be for one employer. He had to stay on PAYE, as an employee of the company. But this was sometime ago and rules may have changed.

 

In regard to your market pay for your skills and the job spec, it might be worth looking at IT recruitment agencies. They will have details of what the market rate is.


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