Self-employed or PAYE? Which is better?
When you first think about becoming a live-in carer, how you will be paid will be one of the first questions to ask. There are two different ways you can be paid, and both have advantages and disadvantages.
Some agencies offer you the choice of one or the other, while other agencies only offer one option. It is a good idea to ask about this before you accept any work offers.
Self employed
In this category, you are responsible for paying your own taxes and National Insurance contributions. You do this by completing and filing your tax returns every year using the Self-Assessment tax form.
If you choose to be self-employed, it is important that you keep all your receipts. You can either hire a tax lawyer to help you with your filing, or do it yourself. Contrary to what many carers believe, it is very easy to take care of your own taxes. There is a ‘Short Self-Assessment’ form to complete and submit. You will receive a confirmation number when it is sent.
Some agencies will only provide you with work when they see proof that you have filed your taxes, so keep this reference number with you.
Self-employed carers will be paid directly by the client or family. This can be discussed with some preferring to receive payment every week and others at the end of the trip. While this is often seen as an advantage, should the client or family disagree on the amount, it is up to you to sort it out as the agency will not intervene. They are merely there to find you a placement.
One of the advantages of being self-employed is that you can choose when you work and for how long. You are not committed to one agency, and if you want to, you can sign up with more than one agency, to ensure that you have work as often as you want.
PAYE
With this method, the company will hire you with a written contract employing your services. The agency will take care of paying your taxes and National Insurance contributions by withdrawing a set amount from your wages every week or month.
You will receive your wages directly from the agency instead of the client, and there is no dispute about the amount, providing you can supply receipts or document extra amounts such as night calls. If there is any discrepancy, the agency will deal with the client or family.
With PAYE you will receive pay slips showing gross pay and deductions for taxes and national Insurance. You will also receive tax form P60 at the end of every tax year. You will receive a P45 if you leave the agency.
With PAYE you are directly responsible to the company, who dictate the training you must do to stay employed. Some agencies will hire carers on a set contract guaranteeing a salary for three months or more at a time, and you will be paid whether you work or not, so they will be more inclined to find you a position.
To sum up
Both methods of pay have pros and cons, and some people are more suited to one than the other. Some people find it easy and preferable to be self-employed while others feel better if the agency takes care of tax and National Insurance contributions as this can sometimes seem overwhelming.
Whichever method you prefer, it is important to make sure that you keep your paperwork in order, particularly if you work for more than one agency.
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