Complete Newbie - Took on contract work without company

[ASB]

Speak to hmrc helpline and explain. As it is in effect a one off they may be prepared to accept it is casual income rather than self employment income. If so it can jist be added into the ANY INCOME NOT DECLSRED ELSEWHERE box on the satr whic is even less hassle.

[TykeMerc]

There's nothing stopping you doing business direct with clients as a self employed Sole Trader, Self Assessment forms aren't too awful these days.

To contract via agencies you really do need some type of incorporated vehicle, usually those are MyCo Ltd's or Umbrellas, some use Limited Liability Partnerships, but those can be a bit more complicated with some agents not happy about them.

There are plenty of competent accountants that understand contracting, some of them post on here and are up front about it. I find Nixon Williams fine for my business, but there are others as well recommended by the CUK posters.

[Carlos76]

Many thanks to everyone for the responses - I'm definitely in over my head, here, so an accountant seems like a wise investment. What do people usually do to decide on one - do a search for local offices; get recommendations from friends ... ?

I registered for Self Assessment and did a quick run through of the online form (but didn't submit), and I only earned ~£5000 in 2012/2013 so I apparently didn't have to pay anything, but will do this again with an accountant when I actually come to submit. I don't have any other income except for interest payments, and no outgoings that I can claim for.

Thanks again!

[Contreras]

Hmmm, had to look that one up. Turns out that it's a a lot less than via an umbrella but still a fair amount.

Class 4 National Insurance - how much you pay

The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9 per cent on annual profits between £7,755 and £41,450 (2013-14) and 2 per cent on any profit over that amount.

So that's about ~£3,000 per year on profits of £~40,000. Definitely worth incorporating.

Less £1000-£1500 for accountancy fees. Definitely worth considering incorporating.

Yes you have the protection of limited liability, but also the responsibility of directorship and your personal details and company accounts are public.

To the OP, you need to:

a) tell HMRC that you are (or have been) self employed. Strictly you should have already done this.

b) do separate Self Assessment Returns for both 2012-13 & 2013-14, due by 31/1/14 & 31/1/15 respectively.

You can get an accountant to help you with the SARs (for around £150-£250 at a guess). Even if you get someone to prepare and submit the SAR for you it would be worth downloading the paper version and having a crack at filling it in yourself just to see what you need to bring together - P45/P60 from your ex-employer, bank interest, investments, rental income, pension contributions, charity contributions, etc. and any business expenses incurred for the self-employment.

[Wanderer]

I doubt that unless you step into top rate tax.

NI is pretty nominal for self employed IIRC

Hmmm, had to look that one up. Turns out that it's a a lot less than via an umbrella but still a fair amount.

Class 4 National Insurance - how much you pay

The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9 per cent on annual profits between £7,755 and £41,450 (2013-14) and 2 per cent on any profit over that amount.

So that's about ~£3,000 per year on profits of £~40,000. Definitely worth incorporating.

[Platypus]

As self employed you will pay a lot more tax than you need to

I doubt that unless you step into top rate tax.

NI is pretty nominal for self employed IIRC

[Wanderer]

Is it really as simple as just entering my own name, here?

Probably - most of us here have LTD companies so I don't know. As self employed you will pay a lot more tax than you need to and there are other problems like professional liability if anything goes wrong.

Take the advice and arrange for a consultation with an accountant. They can figure out how to operate going forward (eg, LTD company) and perhaps make some fairly substantial tax savings.

[northernladuk]

Hi,

Thanks for the response; I see on the online Self-Assessment form that if I choose "Yes" to "Were you self-employed?", I get a prompt for "How many self-employed businesses did you have?" where you must enter at least "1", and give a name for the business. The "help" popup for the "Business 1 name:" says "Please enter your business name. This could be your own name or it could be a trading business name." Is it really as simple as just entering my own name, here?

You are going to need an accountant if you are going to continue contracting so you can kill two birds with one stone here..... Get this wrong and it will cost you a lot more than the cost of the accountant.

[Carlos76]

Register as self-employed and do a tax return based on that.

Hi,

Thanks for the response; I see on the online Self-Assessment form that if I choose "Yes" to "Were you self-employed?", I get a prompt for "How many self-employed businesses did you have?" where you must enter at least "1", and give a name for the business. The "help" popup for the "Business 1 name:" says "Please enter your business name. This could be your own name or it could be a trading business name." Is it really as simple as just entering my own name, here?

[northernladuk]

Speak to an accountant.

[DirtyDog]

Register as self-employed and do a tax return based on that.

[Carlos76]

Hi all,

I am a Software Engineer and was unemployed back in January 2013 when, out of the blue, I had an offer for some programming contract work from a large-ish company based mainly in the US. They needed the work to be done fairly urgently, so I blundered in straight away. I had never done or thought about contracting before then.

They are apparently well-versed in taking on contractors from Europe, and have a Denmark-based office for dealing with this. The contract had an "Entity Type" for me, which, since I had no company of my own, was marked as "[X] Individual". The contract lasted from February 2013 to June 2013. Payment was made via BACS into my personal Natwest current account.

Now I want to declare my earnings to the government, but it seems that I should have formed a Limited Liability Company and done things through that. Since I foolishly didn't do any of that, I have no idea what I should do now.

Any advice on how to proceed with this would be much appreciated