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Freelancers and declared earnings
Posted: Thu Mar 26, 2020 8:14 am
by plodder
Should freelancers be paid 80% of their declared earnings, like employees?
TUC reckons self employed people earn an average of around £12k, which doesn't stack up unless a) that's mostly part time and/or b) they're massively cooking the books.
https://www.tuc.org.uk/news/two-million ... nimum-wage
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 8:43 am
by Woodchopper
Or just underpaid. Average earnings for authors aren’t much over the TUC figure.
https://www.create.ac.uk/blog/2019/05/0 ... 0-writers/
Presumably they get by through having another job or if they are supported by someone else in the household.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 9:55 am
by plodder
Authors are hardly average members of the workforce. They're mostly hobbyists.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 10:48 am
by TopBadger
Well, any who have been understating their earnings in the past are going to cop it now.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 11:16 am
by Gfamily
In my world (IT/Finance). contractors are well paid - and can benefit from the 'tax efficiencies' that work for people who can move earnings out of the higher rate tax bracket, or use 'office expenses' as a means of minimising them.
There are other 'middle class' freelancers, who are working with much less security and remuneration - for example I know a former an arts administrator, working on a freelance basis with small arts organisations; working on grant applications, scheduling events, booking performers and venues etc.
She worked with tiny budgets, and minimal opportunities to 'bulk up' expenses, and really could only manage because it was not her family's sole income. When she was left a widow, she was fortunate to find a semi-clerical job with a small national organisation, but as they are also performing arts related, she may not have security during the current period, but at least she has a PAYE record.
Then there are the millions of people who work the 'gig' economy; for whom, yes - the earnings are often very low and no PAYE records
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 12:04 pm
by jimbob
TopBadger wrote: ↑Thu Mar 26, 2020 10:48 am
Well, any who have been understating their earnings in the past are going to cop it now.
Yup, I had been regarding this as a side benefit
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 1:16 pm
by basementer
Gfamily wrote: ↑Thu Mar 26, 2020 11:16 am
In my world (IT/Finance). contractors are well paid - and can benefit from the 'tax efficiencies' that work for people who can move earnings out of the higher rate tax bracket, or use 'office expenses' as a means of minimising them.
There are other 'middle class' freelancers, who are working with much less security and remuneration - for example I know a former an arts administrator, working on a freelance basis with small arts organisations; working on grant applications, scheduling events, booking performers and venues etc.
She worked with tiny budgets, and minimal opportunities to 'bulk up' expenses, and really could only manage because it was not her family's sole income. When she was left a widow, she was fortunate to find a semi-clerical job with a small national organisation, but as they are also performing arts related, she may not have security during the current period, but at least she has a PAYE record.
Then there are the millions of people who work the 'gig' economy; for whom, yes - the earnings are often very low and no PAYE records
The OP specifically refers to the self employed, though. In the UK, IT contractors have since the late 1980s had to work through either their own limited companies or umbrella companies, as employees on PAYE, so they won't be included in the TUC figures.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 1:18 pm
by veravista
It's not really understating earnings. Back in the day when I ran my own business it was more tax efficient to earn the minimum so you got the full NI contribution but paid no income tax, so a lot of self employed people would earn about £12K. This could then be topped up with cash from the directors loan account and other expenses, and if you were lucky enough to make a profit you paid Corporation Tax, so it's not as if it wasn't encouraged by HM Gov and HMRC
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 3:48 pm
by plodder
Oh yeah, that "business" which means you do exactly what a PAYE employee does but you don't have to pay as much tax, in return for far less job security and no work laptop. IR35 legislation is starting to crack down on this, and my sense is that the CV-19 payouts are in a similar vein.
There is something bittersweet about the £150/h guys (with minimal tax liabilities) facing down universal credit, although it could presumably be done a little more delicately.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 7:02 pm
by dyqik
That sounds about right for the freelancers in my family. Averaged over wedding/event floristry, cello teaching (one person doing both jobs, part time for both, part time total), and guitar pedal building (full time).
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 7:14 pm
by plodder
I’m not sure if the TUC are using mean or median, but it doesn’t take too many IT / Engineering / builders / plumbers / sparks / other professional contractors on £500+ / day to offset the handful of guitar pedal builders, authors and cello teachers out there.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 7:15 pm
by dyqik
plodder wrote: ↑Thu Mar 26, 2020 7:14 pm
I’m not sure if the TUC are using mean or median, but it doesn’t take too many IT / Engineering / builders / plumbers / sparks / other professional contractors on £500+ / day to offset the handful of guitar pedal builders, authors and cello teachers out there.
There's an awful lot of music teachers, authors, driving instructors, dance teachers, etc. doing things part time.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 7:17 pm
by plodder
Heard on the radio so from memory: the official line is 80% of declared incomes averaged over the last three years up to (i think) £2,600 a month, taxable.
That’s not sounding very generous compared to PAYE employees.
p.s. part time skews are mentioned in the OP.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 7:21 pm
by dyqik
plodder wrote: ↑Thu Mar 26, 2020 7:17 pm
p.s. part time skews are mentioned in the OP.
I know, that's why I quoted it.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 8:09 pm
by Gfamily
plodder wrote: ↑Thu Mar 26, 2020 7:17 pm
Heard on the radio so from memory: the official line is 80% of declared incomes averaged over the last three years up to (i think) £2,600 a month, taxable.
That’s not sounding very generous compared to PAYE employees.
p.s. part time skews are mentioned in the OP.
Payable in June - coz that's what the self employed are used to.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 9:07 pm
by badger
plodder wrote: ↑Thu Mar 26, 2020 7:14 pm
I’m not sure if the TUC are using mean or median, but it doesn’t take too many IT / Engineering / builders / plumbers / sparks / other professional contractors on £500+ / day to offset the handful of guitar pedal builders, authors and cello teachers out there.
But if almost half of self-employed are on
less than guitar pedal builders, then the offset is in the other direction.
See TUCs figures from 2019
https://www.tuc.org.uk/blogs/almost-hal ... overty-pay
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 9:27 pm
by plodder
not if three hours a week violin tuition is lumped in with 60 hours a week engineering. Don’t know where their average comes from.
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 10:09 pm
by badger
As it says in the link, it comes from the Family Resources Survey.
See page 12
https://assets.publishing.service.gov.u ... 018-19.pdf
Re: Freelancers and declared earnings
Posted: Thu Mar 26, 2020 11:55 pm
by dyqik
It's also going to include child minders, event workers, musicians and techs, translators, voice-over artists, actors, etc.
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 5:37 am
by Woodchopper
dyqik wrote: ↑Thu Mar 26, 2020 11:55 pm
It's also going to include child minders, event workers, musicians and techs, translators, voice-over artists, actors, etc.
And lots of cleaners.
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 8:05 am
by badger
plodder wrote: ↑Thu Mar 26, 2020 7:17 pm
Heard on the radio so from memory: the official line is 80% of declared incomes averaged over the last three years up to (i think) £2,600 a month, taxable.
That’s not sounding very generous compared to PAYE employees.
p.s. part time skews are mentioned in the OP.
It's £2500/pm cap and it's the same cap as PAYE (or possibly more as we haven't had clarification whether PAYE amount will be passed on in full, or employers will take NI and other costs first)
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 8:49 am
by plodder
Ah, ok. These are self-reported earnings. There are obvious motivators to under-declare income, especially in a government survey.
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 8:54 am
by plodder
Woodchopper wrote: ↑Fri Mar 27, 2020 5:37 am
dyqik wrote: ↑Thu Mar 26, 2020 11:55 pm
It's also going to include child minders, event workers, musicians and techs, translators, voice-over artists, actors, etc.
And lots of cleaners.
It's fine to list lots of freelance jobs, but bear in mind that a multiplier needs to be added to allow comparisons if these jobs are (a) part time, (b) cash in hand, (c) only rarely carried out (a trapeze artist might make good money one day per month, or just during festival season etc).
Otherwise it's disingenuous to compare a PAYE low paid person to someone self employed.
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 9:20 am
by badger
So to go back to the question in the OP, the answer is yes, given the caps involved (scheme for SE earners under 50k, who are "in need", and paid at max 2.5k).
I hope with any correction to SE tax system "going forward" as Sunak signalled (which, as a sole trader who has never formed a limited company to avoid tax, I welcome), there is a correction to the inequity of zero hour contracts and forced self-employment.
Re: Freelancers and declared earnings
Posted: Fri Mar 27, 2020 9:44 am
by plodder
I agree with that, to a certain extent. The flexibility offered by zero-hours contracts cuts both ways, and probably allows employers to pay for more hours per week (in total) than under traditional arrangements. However also agree that it's open to misuse and I feel should only be available if certain criteria apply.