Going Freelance for the first time..

[mrcog]

Dear All,

 

Having finished college in June, and having been employed at a few local venues, working for the last 8 or so months, I am now getting offers for freelance work. However, obviously this means I now need to registar as self-employed and get some PLI. However I'm not going to lie, I do genuinely feel lost when dealing with the whole tax and registering as self-employed issue...

 

As I understand it, I need to registar as self-employed through the HMRC website through the online system. However, as I believe my freelance earnings will be under £5315 a year, that means that I don't need to pay NI contributions? Or does that £5315 limit count as your total earning through everything I do?

 

Regarding tax, as I am starting university in September my yearly earnings for 2010/2011 and probably 2011/2012 will be under the tax limit. Do I need to inform the tax office this or will I just need to fill in the self-assessment form? For this tax year (2010/2011), my self assessment deadline will be 31st January 2012 if I do the assessment online? Is that correct?

 

Regarding my public liability insurance. The primary company that I am registering as a freelancer for specify's that I must have PLI up to £2 million. Is £2 million appropriate or would people recommended 5 or even 10 million? I was planning on getting quotes through comparethemarket as they do business insurance. Are there any insurance company's that people would avoid steering clear off? Or any company's people recommend?

 

I do apologise if I seem naive and young, I am. This obviously is the first time I've done this and it's not something I was taught, even doing A level business studies..

 

I would really appreciate any guidance given.

 

Thanks in advance,

 

James

[zonino]

is it true self-employed work or would should you actually be being paid as an employee so they deduct tax and NI at source? that would be much simpler for you, and probably more in line with what HMRCs view of your relationship would be as well

[Junior8]

Zonino is right and HMRC are much stricter about this than they used to be. I haven't freelanced in this area for years so I have no idea what goes on but in most cases these days unless the worker can prove they have self-employed status I understand that the employer is bound to treat them as an employee for PAYE and NI. (I should point out this has nothing to do with whether it is sensible for you to work this way it is merely HMRC making sure that they get both the tax and the employers NI contribution.)

 

The first thing to check is that you are actually entitled to self-employed status. If you end up freelancing for only one company that might not be the case. There is an on-line tool on the HMRC website which enables you to check this. There is also a page about working while you are a student. If you are accepted as entitled to self-employed status then you need to take advice from HMRC about whether you do need to register your business. As for NI when I had a mix of self and paid employment HMRC were willing to allow me to discharge all the NI liability through Class 2 and Class 4 but the bit of paid was near the lower earnings level and the differences were trivial - you need to talk to them. As for tax if you register as self-employed they will automatically send you a tax return form - and you can fill it in on-line where it knocks out your tax bill as you go along. If you had any earnings for the tax year 10-11 they would send the form very soon after April 5th this year and you have until 31st Jan 12 to do it on-line. In practice it is best to do it as soon as you can - it makes no difference to when the tax has to be paid or how much it is!

 

Apart from that see if Businesslink in your area run seminars on tax, bookkeeping, self-employment etc. When I started up they were the best things I did...

[mrcog]

It is indeed true self-employment. They tell me what work they want me for, I provide a quote. I do the work and send an invoice. Chances are that once I do go freelance I will stop being employed by at least one company that I'm employed for and instead work as a freelancer for them. As at the moment I am only being employed by them to get round the whole 'I'm not registared as a freelancer' malarkey. So I will infact be freelancing for more than one company...

 

Thanks very much for the advice so far guys, any more is much appriciated from anyone else!

 

James

[nb705]

Look at membership in BECTU or one of the other unions for PLI purposes, the policies are sound and there are other bonuses to joining a union such as legal representation.

[themadhippy]

The NI is a tricky one for someone just starting out,if you dont pay it,it could leave you without enough payments to recive benefits/state pension in the future,however if you do pay it will these benefits still be avalible when you finally need them?

[paulears]

Just thinking what Mr Hippy has just said - it's worth checking because if non-payment of NI wrecks benefits, then would it also have an impact on student loan status and fees? Setting self-employment up is a single phone call and a Government Gateway account - as my son found out - but then you also get a self-assessment to do. When you call HMRC they're actually quite helpful.

[gareth]

Self-employed NI contributions are minimal, and well worth keeping up with regardless of earnings so that you don't find yourself short on contributions in years to come.

 

BECTU are, as has been said, good for PLI for someone working as a freelancer in the entertainment business, as long as you just want simple PLI without any 'non-standard' additions. In fact, it's the only reason I kept up my BECTU subscriptions when I was freelancing - it was by far the cheapest way to get PLI. They cover their members through AON, and if I recall correctly it's £5m cover.

 

Tax-wise - the answer is simple, find yourself a good accountant who knows a bit about this business and can guide you through the loopholes. It is possible to do it yourself as long as your accounts are quite simple, but a decent accountant will save you more than they cost you, so it's a no-brainer.

[Jivemaster]

Before you become self employed consider the implications for your immediate future. In particular your funding through your uni course. You could lose your funding/loan etc. It could even start the repayment process long before you can afford it.

 

The other MAJOR consideration is competence. You can, and from what you say probably should, buy the services of an accountant to do the books and tax return. However are you absolutely confident in your competence in the task for which you wish to freelance? Once you are truly self employed you have to accept responsibility and liability for your work. If you have 8 months real experience, there may be many more things to learn in the real practical world.

 

In your situation I'd be very keen to be a casual employee for a LOT longer. If "a company want you to be a freelancer" this will likely infer that they really should be employing you but don't want to do it properly. Freelancer -self employed contractor- is something you do when you are truly ready and understand the implications, which clearly you do not at the moment, not something you do when your employer says so.

 

Also consider the value of the work you may get during your uni course. If you can earn £30K salary then you don't need the degree but it may make a nice addition to the mantlepiece. Less than £3K and it's not worth the bother. However there is getting to be an accepted tradeoff between grade of pass and hours worked, so do too many hours and you may not pass after three years of hard labour and some study in poverty.

[kerry davies]

James, just don't.

Stick with casual work, become an employee but registering as self-employed means a lot more than using the meaningless word "freelance". (Unless of course you have a horse and a shield and...)

 

Just one item. Have you arranged for some form of H&S training for your employee?

Did you even know you were legally bound to? Did you understand that you would have both an employers and an employees duties? Complex, innit?

 

FWIW if you are working solely in theatres then the BECTU insurance might just suffice but you would need better to get on to an outdoor site which I managed. It is far too limited. See insurance topics galore in Search.

 

I really admire your honesty in asking the questions, so please do not be disappointed with everyones answers. Basically you are not yet ready if you need to ask. Use the time to research what exactly self-employment entails, learn about registration, find out what legal areas you need to know and what would be the optimum industry-entry conditions for you personally.

 

I am a cynical old sod and wonder why a prospective employer wants to engage an 18 year old sub-contractor in the first place. They obviously would not be avoiding tax, or any other responsibilities or anything would they?

[Junior8]

It is indeed true self-employment. They tell me what work they want me for, I provide a quote. I do the work and send an invoice.

 

Sorry it's not always as simple as that. Use the on-line tool. If it concludes you are self employed then HMRC will abide by that decision - that's OK. Casual work on an ad hoc basis when all you provide is labour is not, automatically, self-employment. They - not you - decide.

[Jivemaster]

Realistically you don't have the life or work experience to become self employed even if HMRC will permit it. I'd strongly suggest that you find appropriate employment even casual employment for your gap year, then look at getting a little casual employment to assist you through your course.

 

Without five year's real work experience you will be very short of the knowledge and experience that would make you a safe self employed subcontractor.

 

As an employee you get the training provided by your employer, as a self employed subcontractor you have to find and pay for the training. Next time you go to your employer's place of work take a few minutes to read the mandatory HSWA poster -see employer's responsibilities and employee's responsibilities -you get both responsibilities when self employed.

 

If someone wants you to be "Self Employed" when you clearly have little experience, they are possible trying to evade the employer's responsibilities by pushing them onto you.

 

If a place will not properly casually employ you then don't go there.

[Dj Dunc]

Im in the same boat here. I work almost solely for one company,(with occasional work for others) but they would much rather I was "self employed" for what reason I do not know. This would mean registering as self employed, getting PLI etc as pointed out by other people. According to the HMRC self-employment indicator, it does say I am self employed.

 

Hmmmmmmmmmm (Tm Ynot)

[gareth]

I work almost solely for one company ...... According to the HMRC self-employment indicator, it does say I am self employed.

 

Those two statements don't really sit well together.

 

And the reason they would rather you were "self employed" is that it means a WHOLE load less for them to do and worry about. Basically, they want their bread buttered on both sides - they want you working on their jobs, but they don't want to take the responsibilities which go along with having you on the books as an employee.

[mrcog]

Wow, thats provided a real whole load of food for thought!

 

Firstly, for those implying that the company might be a bit dodge. I can re-assure you that they are not. It's primarily a PA and AV hire and production company. I believe they employ around 20 odd people from what I can tell from when I went to attend an interview the other week with one of their Director's to see whether I would be suitable for the post. Along with the people employed I believe they must have a database of freelancers as I was given a 'Freelancers Handbook' for the company with information about their company policys and such. I genuinely don't think they are trying to avoid going through the hassle of employing me as they are a reputable company and seem to be very strict on doing things the right way.

 

Regarding the whole student loans and fee's issue, that is an issue I hadn't considered. Thanks very much for mentioning your concerns about that Paul and I'll be on the phone to the tax office monday to enquire about that along with many other questions it looks like!

 

Regarding NI contributions.. Are they a set amount per week per worker, or is it a percentage of your income? However yes they are a small amount per week for what could benefit me in the future so I'll again speak to the tax office when I phone up on monday.

 

I will also make a note to speak to an family friend who work's as an account and takes care of my grandfather's charity's accounts. Is it going to be more beneficial to go to an accountant with experience of this industry though?

 

Jivemaster, firstly thanks for the very informative post. As I have mentioned above I will defiantly be calling the tax office to find out about the issues regarding student loans. Secondly regarding competence.. I completely agree with you, I do not think I am going to be competent enough to figure out this tax stuff by myself, and I don't particularly fancy a stint jail for tax related offences due to mistakes on my part! However regarding competence to the job in hand... I have only been working in this industry for 8 months professionally. Before that I have 5 years of amateur and volunteer experience and 2/3 years of really good experience (in my eyes). I am not one to take on a job that would leave me out of my depth, it's something that I believe is unprofessional, and could potentially and probably would ruin my carrer before it really started!

 

Kerry, I'm not going to lie and try and blag it. No I had no idea I would have to provide health and safety training for myself. However, I was aware I would have to be producing risk assessments for the jobs I would be undertaking. I did understand I would have both employer and employee's duties though, I just hadn't looked deeper into those employers duties.

 

Cheers for the advice on the BECTU insurance Kerry, the work I'll be doing will primarily not be in theatre's so I guess I'll be looking elsewhere. I had heard bad things about BECTU insurance being very limited and with lots of factors to consider written in the small print before so yeh...

 

Also, as I mentioned in the first paragraph of this response, I do not believe that the company in question would be trying to get out of any responsibilities of an employer.

 

Junior8, I hadn't actually tried that online tool as I was under the impression that I defiantly should be under the self employed category. I will try it after I finish writing this post and see what the outcome is. And will then work forwards from there.

 

Jivemaster, thanks for the post. I do appreciate what your trying to say and too a certain extent accept what your saying. However I do take offence and I'm sure others might do too when you say that without 5 years of employment your an unsafe worker? I will take some time to read the Health and Safety at work act now, it's something that hadn't really popped into my head however hopefully it will be able to put me onto the right track.

 

Thanks very much for the advice so far guys, I'll keep you posted as I do more research into the whole thing.

 

Cheers,

 

James