Completely new to this: Can I just freelance as an individual?

[Delatron]

I have just been offered a part time role but it is on a freelance basis.

Have no experience of freelancing, a few of my friends say I need to set up my own company for tax purposes? Do I have to do this or can I just work as an individual and fill in a self-assessment tax form at the end of the year?

I don't think tax will kick in for a good 7 months or so?

Thanks for your help.

You need to register with HMRC as self employed. You'll need to do a self assessment the January after the first April you start business, so if you start today, January 2015 will be your first return.

You'll need to keep books and records in case HMRC wants to see them.

You can make up a company or just use your own name.

Thank you, that clears it up. Was worried as I start in a few weeks and I haven't done anything. Sounds quite straight forward though.

If you are working the same days/hours for one employer then HMRC may not view you as self employed...

www.hmrc.gov.uk/employment-status/#1

Yes, also a good point, Margrita.

They can't make you freelance and then restrict anything about your working in terms of location or hours, or you're not freelance and they have to make you an employee.

A couple of other things to bear in mind:

• National Insurance. As a self-employed person, you need to pay Class 2 NI at a flat rate of £2.70 per week. You can apply for exemption from this of your net income from self employment is less than £5,725 per year. You will also be charged Class 4 NI at 9% on income between £7,755 and £41,450, and 2% on anything over that.

• Expenses. Don't forget to keep a record of all your work related expenses as these can be deducted from your earnings and reduce your profit, and hence tax bill.

Have a look at HMRC and the self-employed section on gov.uk to see what you need to do, or spend a little time with an accountant who will be able to advise.

I freelance and just use my own name. I thought about setting up a limited company but not worth it for my earnings.

However I freelance for several companies, sometimes up to 5 in one week. If you are only working for one plAce and doing hours dictated by them then you are an employee and they are probably offering freelance as a way of avoiding paying employers NI and you will have no employment rights.

How are they going to pay you? If you are invoicing them then check how long they will take to pay and tell them what your payment terms are. Ie if they take 30 days then invoice at the end of each week, don't wait to the end of a month.

Also check whether you are covered by their insurance, you might not be. I have indemnity insurance which costs me about £250 a year. Are they expecting you to use your car for business purposes, in which case you will need a more expensive insurance policy to cover business use.

If you use your own name the you are ok to pay the wages into your normal current account as its your wages. If your set up a limited company then you will need to open a business bank account in the company name and business accounts can incur high charges.

You will have no employment rights, not even covered by the agency workers regulations, so they can finish you at any time, and if they finish you and theres money outstanding it can be difficult to get paid.

Once you have registered with hmrc as self employed I think you can be entitled to statutory sick pay, but no dole if you are out of work, (check those ladt two out, ive been self employed 6 years and never needed to claim). So if you hav eto ring in sick you will get no money at all for a few spdays till ssp kicks in. however you can claim tax credits.

Tax return for straightforward self employed is nothing to worry about, keep a record of all money in and any expenses.

Don't mean to be completely negative, just trying to let you know what to look out for!

If the company you are working for is happy for you to be self employed, as opposed to being the owner/director of a company, do that.

This is because, if HMRC later rule that you should have been employed, if you are self employed, the onus of the additional tax will fall to the company you are contracting to. If you are trading via a company, any additional tax will fall to your company.

You need to look up the link about employment status above, to see how much of a risk it will be.

Oh wow, thanks everybody. I thought I was asking a stupid question but it does appear to be a minefield. Will read all the stuff on the HMRC website.

The owner of the company never mentioned anything about me being the owner/director of a company and the contract is between me and them as an individual. I just want to make sure I do everything by the book but as I won't be earning a huge amount, I didn't want to incur costs of setting up a company, getting an accountant etc.

They have said they will pay one month in arrears? Thanks Fibberty, really good point about insurance, you are not being negative, it's good to have everything covered.

Thanks everyone, you have been most helpful!

If the contract is between you and them then you are straightforward self employed for tax purposes. Check whether one month in arrears means if youll get paid end of first month, or whether you will work a month and then write to the end of the next month to get paid. What period of notice woukd you get.
If you are out of work and claimimg anything currently then think hard about changing to self employed status for this employer as im sure you cant claim jobseekers etc if tbe work dries up. You might be putting uourself in a worse future financial position for the sake of anemployer who just wwants to avoid all his employer responsinilities.
Sorry for typing am on phone.

Thanks fibberty, you have given me a lot more to think about. Definitey need to check about when I will actually get paid. In my contract the notice period is one month for either side.
Have been a SAHM for a couple of years (unwillingly, had serious illness) so we have just about been managing on DP's wage. Therefore, job seekers allowance isn't too much of a concern for me but it's a good point that I hadn't thought of. Your points have made me realise that the employer is getting a lot of benefits from taking me on as freelance and I need to be aware of that.

Lots of good posts here so I won't add much apart from to say you really can't both have a contracted role and be freelance, certainly in the eyes of HMRC. The main criteria for being freelance (I'm paraphrasing) is that you are free to chose what companies you work for, and when. So if you have contracted hours, you can't really be freelance.

It sounds to me like the employer is ducking their responsiblities. The main question to ask is around wages - is he paying you more or less the same as an employed person? If so, he is at it. Freelance rates are usually higher, because the freelancer is responsible for tax and NI and the work isn't guaranteed.

Thanks WilsonFrickett, it does seem like I fit the role of an employee rather than self-employed according to the HMRC website. However, the job is perfect for me; flexible hours and quite good pay. I am prepared to take a hit on sick pay and holiday pay just to get back in the working world and get my cv looking a bit better. Though, as the company are getting a good deal out of me, will make sure I don't do any extra hours etc.

If you do extra hours then invoice them. Freelancers get paid a daily or hourly rate not a pro rata salary!
Sounds like it will suit you well but make sure the flexibilty works for you and not just the employer chopping and changingyou hours.

Make sure you calculate your tax and NI before you decide it's good pay .