The Salary Calculator attempts to show you your take home pay after tax, National Insurance, pension deductions and Student Loan repayments – based on the assumption that you are an employee, and your employer will be making these deductions from your payslip by Pay As You Earn (PAYE). However, if you are self employed, tax and National Insurance is calculated differently, and you have to tell HMRC about your income, and then pay them what you owe directly.

If you are both employed and self employed at the same time, or change from employment to self employment during the tax year, your tax liability can be quite complicated. Your employment income will have been taxed by your employer, but the amount of self employment tax and National Insurance you pay will be affected by how much you have already paid through normal employment.

A new sister site for The Salary Calculator has been launched to try to help in this situation. Simply called Employed and Self Employed, there is plenty of information available and links to details from HMRC. There is also a complex tax calculator which will try to estimate your tax liability based on the information you provide.

Tax and National Insurance details which take effect from 6th April 2012 are applied, although previous tax years from 2009 onwards are also available for calculations (including the current 2011 tax year). If you are interested in the figures involved, you can check out the details page which contains detailed information from HMRC.

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None of the content on this website, including blog posts, comments, or responses to user comments, is offered as financial advice. Figures used are for illustrative purposes only.

3 Comments to Employed and Self Employed

  1. […] I mentioned last month that The Salary Calculator has a sister site called Employed and Self Employed, which helps with tax and National Insurance calculations if you are both employed and self-employed at the same time (or in the same tax year). […]

  2. National Insurance refunds | The Salary Calculator on May 14th, 2012
  3. II am between 68 just retired for several years other than doing some part time invigilating.I am about to do some self employed consultancy work.I have a state pension and an occupational pension and a couple of small private pensions.These total circa £23000 p.a.

    I will be earning at the rate of £400 per day .The contract could run for a month or a year.What are the pros and cons of being limited company status or direct agency employee ?? I am thinking specifically about any advantages net pay wise that one situation has against the other.

    Any help will be much appreciated.

  4. Robin provan on February 12th, 2013
  5. Hi Robin,

    I’m afraid I’m not very familiar with the tax rules for contractors as neither The Salary Calculator nor Employed and Self Employed currently supports the relevant tax calculations, and I’m not in a position to go through all the differences.

    My understanding is that limited company status has tax advantages but at the downside of further paperwork and reporting. As a limited company you would take most of your pay as dividends rather than as salary, dividends on which National Insurance Contributions are not due. This is where most of the net pay advantage lies – but as you are over 65 you would not pay National Insurance on a salary either so it is likely this would not be of much benefit to you.

    You are probably already completing a self-assessment form each year – as a limited company you would also have to file accounts and make PAYE payments every quarter. If your contract ran for enough of the year, you might earn more than the VAT Threshold, meaning that you would also have to complete VAT returns.

    I suggest you find a local accountant and speak to them about the pros and cons of your specific situation – they will be able to talk you through the relevant regulations in more detail.

    I hope this helps!

  6. admin on February 12th, 2013

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