What is the difference between PAYE and self-employed (UK)?

Question

I recently moved to the Edinburgh from New York. I have always in the US as a freelance stagehand, and now I'm looking for similar work over here. Employers are giving me the choice between being self-employed and PAYE, but I can't find specific definitions of these terms for the purposes of taxes in the UK. What are the advantages of each?

Thanks in advance for your help!

Answer 1

My understanding of it, is this:

If your PAYE, it means they will do the payroll, and deduct Tax and national insurence (NI) from your pay for you and on your behalf.

If your self employed however, it means you will need to file tax returns every year and will need to contribute to your NI and pay your tax.  You may even need an accountant to help if you wish. You might also want to contribute to a pension fund.  If your working for these people and under them, you might be able to join their pension and they would contribute a percentage as long as you paid in.

You may also be able to claim certain expenses as a self employed person, where as working for someone else you might not.

It's a lot more complicated going self employed but many are happy to do so as your basically your own boss and you work for yourself. You find the work and do things on your own.

But for instance if work were to run dry or you loose a contract you probably wouldn't be able to claim unemployment benefit.

In this case if you were on PAYE, you would work for them but on a freelance basis. You might be able to claim unemployment benefit if they were to stop giving you work.

My grandparents were self employed so I have some idea of the ins and outs.

Best thing to do, to get some real definition call ACAS

http://www.acas.org.uk

Helpline

08457 474 747

Switchboard

020 7210 3613

Good Luck!

Answer 2

There isn't a choice. Either you are self-employed as a matter of law, or are an employee subject to PAYE.  The difference depends on a number of factors relating to what you do, how you do it, and what the "employer" can require you to do and what financial risks you personally take.