On April 6th 2014 the Government changed the way they determine whether someone is self-employed for tax purposes. This legislation, known as the Onshore Intermediaries Legislation is an attempt to reclaim some of the £500 million the government estimates it is losing annually to “false self-employment”.
The means some contractors may no longer meet the criteria to be considered “self-employed” (including CIS) where there is control, direction or supervision (or the right of) within the labour supply chain.
A simple way to work this is out is by asking yourself the questions below. If you work via a recruitment agency and answer yes to any of these questions then you may not be considered self-employed.
- Is someone dictating what work you do or how you go about doing that work?
- Do they have the power to move you onto another job?
- Is someone making you do the work in a certain way by providing you with instruction, guidance or advice as to how the work must be done? (Someone providing direction will often coordinate how the work is done, as it is being undertaken.)
- Is someone overseeing the work you do to ensure the work is being done correctly to the required standard?
PAYE must now be accounted for on your earnings. The following compliant payment options may be available to you when you are contracting or temping via an agency:
- Agency pays you direct
- Become an employee of an umbrella company
- If you have your own PSC (Personal Service Company) which operates PAYE
This is dependent on your hourly wage. If you are paid £8.50* and above, an Umbrella PAYE model may be the best solution and may have travel and subsistence benefits. If you are a higher paid worker a PSC may be the best option.
Tax and National Insurance rates under PAYE
As an employee you will be paid PAYE, this means:
For Income Tax you will need to pay:
- 20% on any earnings between £10,001 and £31,865
- 40% on any earnings above £31,865
For National Insurance Contributions you will need to pay:
- 0% if you earn below £153 per week
- 12% on earnings between £153 and £805 per week
- 2% on earnings above £805 per week
Here at Simplyco we’re here to make your life less complicated. If you are still unsure about the most compliant method of payment we’re happy to help. We are more than just accountants and we focus on more than just numbers. We fully comply with all the relevant legislation and have legal support from retained Solicitors and trade bodies (REC and APSCo) which means we make sure everyone pays exactly the right amount of tax. See for yourself by trying our online calculator to see how different payment models affect the amount of tax you pay.
Download our info-graphic – Are you still considered Self employed
Simplyco are expert contractor accountants and take a keen interest in keeping their clients up to date with any news, updates and changes to legislation which may affect them. To find out more about the services we provide or to apply to join, call on 01900 898 440 or email firstname.lastname@example.org.
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