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Where Taxpayers and Advisers Meet

Self Employed Tax & NI

Joined:Thu Aug 24, 2023 8:53 am
Self Employed Tax & NI

Postby Dave1234 » Thu Aug 24, 2023 8:58 am

I am currently employed earning £72,000 per year, which equates to a take home of around £4,000 per month.

I am looking to go self employed and will setup a limited company.

I have been offered £260 per day plus 35p per mile travel expenses. The £260 per day based on the amount of days a year I will work, works out to about £57,000, so a shortfall from my current earnings.

I’ve heard a lot from friends that even though the gross is lower, do to tax and NI benefits the take home could actually be more but I can’t seem to get a straight answer from them on how this would work. Nor can I really find much info online about this.

Based on the above, how much NI and tax would I be looking at paying and what would a monthly salary take-home look like in the most efficient way.


Joined:Wed Aug 02, 2017 9:09 pm

Re: Self Employed Tax & NI

Postby darthblingbling » Fri Aug 25, 2023 10:37 am

First of all how certain are you that this is genuine self employment, sounds like you've got one client whose paying a day rate. Albeit I don't know all the facts of the engagement but these are generally indicators of employment. Could be caught by IR35. Might be one for the end user of your services to worry about however depending on their size.

The PSC itself will pay corporation tax, likely at 19% given your expected turnover (subject to change), on its profits.

Assuming all is hunky dory, typical one man band PSC will pay themselves a salary up to the primary threshold and the rest in dividends, typically up to the higher rate band. The salary can be taken as a deduction for your PSCs profits but no deduction is available for dividends.

Tax wise it's getting harder and harder to do efficiently, but the main saving is in NIC as if done correctly you won't pay any NIC whilst still getting a credit on your record.

Also fairly common to give shares to a close family member such as a spouse so that you can take advantage of their allowances and bandings. Will depend on your personal circumstances however.

There is also an admin cost to all this, payroll, statutory accounts and filing, CT returns, etc. You'll probably want to engage an accountant to do all this given it seems you have little background as you risk getting it wrong and a good accountant will probably pay for themselves with their support around all the compliance stuff.

Joined:Wed Aug 02, 2017 9:09 pm

Re: Self Employed Tax & NI

Postby darthblingbling » Fri Aug 25, 2023 10:50 am

Actually, replace primary threshold for lower earnings limit.

Joined:Wed Aug 02, 2017 9:09 pm

Re: Self Employed Tax & NI

Postby darthblingbling » Fri Aug 25, 2023 11:30 am

Rough calculation assuming salary of £6400, other expenses of 5% of turnover and the profit wholly paid out in dividends I get take home pay of approximately £42,500 for the year.

So I think you'll probably be worse off as it stands

Joined:Sat Feb 01, 2014 3:26 pm

Re: Self Employed Tax & NI

Postby bd6759 » Sun Aug 27, 2023 12:14 pm

You will not be self-employed. You will be employed by the company that you set up.

If you have a single client, it may be that will be treated as employed direct: too many issues to consider.

Don’t take advice from your friends. If you are going ahead with this, engage the services of someone qualified to give bespoke advice that match your needs.

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