Dummies guide to self employment?

[LadyOfWaffle]

DHs work have decided to switch him to self employed, sorting the details tomorrow but in a nutshell what do we need to know? Am I right in thinking he has to 'register' as self employed asap, within 3 months, and whatever he earns he just keeps (will full records etc. etc.) and every June and Jan. someone works out what he owes in taxes and he gets a bill for it? OR does he some sort of tax weekly/monthly still? And what happens with NI? Am I right in thinking there are different levels? We would want the full whack really. Do we notify child tax credits of this change yet? Hopefully it's only for a few months anyway before he changes jobs but I don't want to be arrested or something for getting it all wrong! Thanks so much

[avenanap]

He has to register with the Inland Revenue before three months, they will give him a tax ref number which you need to give to the Inland Revenue for the tax credits. Every three months you'll get a letter telling you how much NI to pay. Tax is payable yearly after your tax return has been completed and sent off. Keep some in a seperate account so you don't have a big shock. I don't know about the rest, my business has never earned enough for me to pay tax. I don't know why I bother really. Good luck though!

[LadyOfWaffle]

Thanks, that's sort of the jist of the stuff I need to know.

[winestein]

it's all here

You won't be arrested! The worst that could happen is that he doesn't register within 3 months and be fined £100 or that your child tax credits could be overpaid to you and you would have to pay them back.

I think you have to pay NI on a regular basis but I am sure you only pay tax once a year. To this end, do not just put all the money in your current bank account. Either put it all in and religiously save a set percentage of it to pay the bill or set up another current account and use it like a business account to "pay" your current account - leaving the percentage behind (I have a limited company and I know that if I were to transfer to self employed ever I would find the latter method easier)

HTH

[winestein]

x-posts

[Candlewax]

Also please bear in mind that when he has to pay his tax bill, the tax man will also want half of what he has just paid up front in January as well and another half up front in July and so it goes on......

Can I just ask, who else is he going to be working for?

[LadyOfWaffle]

I don't understand? You mean his tax bill might say be.... £5,000, so then the next Jan and June the tax man will want £2,500 and £2,500?

[LadyOfWaffle]

He won't be working for anyone else at the same time, if that's what you mean?

[winestein]

I think Candlewax is suggesting if he is not working for anyone else then it is perhaps offside of the company to switch their employees to self employed (i.e. not allowed, and they could be taken to task over it)

[winestein]

work out if you are employed or self employed here

[Candlewax]

Thanks Winestein, I just had to put someone back into bed.

If you are self-employed and work for just one person then you are NOT self-employed and it is the company trying to get out of paying the necessary taxes and NI etc. It could all end in tears.

And yes, when you pay your tax bill, you have to also pay half of that tax bill in advance for the coming year and the next half again in June. So, if the tax bill was £5000, then he would have to pay £7500 in January and another £2500 in June and so it goes on. Inland Revenue want half of what your tax bill is in the year on account every year so if it goes up, so do your payments on account.

[LadyOfWaffle]

Yikes - definatly working for one person, they said everything will stay the same - he is a chauffeur so I think he gets 75% of all the jobs he does and they are taking 25% for car hire and (hopefully) insurances etc. DH rung me and told me they had started it as of today so I hope it's all above board

[LadyOfWaffle]

They kept telling him "oh, you won't have to pay taxes for 2 years" (to me that means he will be whacked in one go for 2 years or something, but they are making it sound like to him you get 2 years tax free)

[LadyOfWaffle]

Feck, reading the website about it all it's sounds like a tax dodge on their part, nicely coinciding with me being 6 months pregnant so he can't take the rest of his holiday when the baby is born

[flowerybeanbag]

LadyofWaffle a company who is employing someone can't just decide to switch them to being self-employed. As you have seen from the links, your employment status isn't something you choose or decide yourself, it is what it is, based on what you are doing and the nature of your relationship with the company you work for.

Your DH is employed by this company. I would suggest he challenges this. They are attempting a tax fiddle but are also attempting to get out of their employment responsibilities and therefore deny your DH his (considerable) protection under employment law.

[winestein]

Spot on Flowery - speak to the Inland Revenue Waffle. They will advise you of the best approach and it may be something they would take on (they are really really helpful if you don't owe them money!!)

[LadyMuck]

How long has he been employed by this company? Does he have a contract of employment?

It is not really just a status that you can switch that easily, and he needs to understand how he will be treated going forward. For example issues around insurance and liability would be my particular concern, though obvioulsy losing holiday pay, sick pay and redundancy pay entitlements are also an issue.

[LadyOfWaffle]

He has been with them about 6 months - he has never signed anything (which worries me to start with as I cannot find out his legal annual hours as a chauffeur - sometimes he does 80 + hours a week). I will definatly call the IR, although I have sent off applications to two new jobs as this company really take the p!ss as he is salary paid rather than hourly or by job.