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Self-employed Stock Photographer in UK - How?


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Hi,

 

I'd like to ask for your help about which obligations does a self-employed stock photographer has in UK.

 

What type of taxes and contributions, for Social Security for example, are mandatory to make? What are the percentages of income necessary to give to the state for both taxes and other contributions?

 

If you can answer my questions I'd appreciate it a lot. Thanks for your help.

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Start here...http://www.hmrc.gov.uk/selfemployed/........the amount of tax and national insurance you pay depends largely on your income(s) but if you estimate around 25-28% of your gross income as being the taxable part, you shouldn't go far wrong......(unles you expect to eran big bucks!!! in which case it can be between 40-50%!!

 

There are however lots of ways of reducing your `burden'  .  You have to register within 3 months of starting, but HMRC can be very helpful, sometimes they run courses or provide self help.

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You can go two routes, either be a sole trader or form a limited company. The former is the easier but there can be tax advantages to the latter, along with limited liability on borrowings etc. As pointed out, the best place to look is the HMRC website and the various small business sites.

 

Tax wise as a sole trader you have to pay your Class 2 National insurance stamp each quarter - currently £70.20 (I will be paying my bill today), you also will have to pay tax on any profits you make plus Class 4 National insurance on those profits. You can also voluntarily apply for VAT registration even if under the mandatory limit which may have advantanges for you. In your first year you can bring equipment into the business and offset against tax so tax burden in year one or two can be actually quite low... that's pretty much par for the course for most businesses.

 

Registering as a sole trader is easy, I do my own bookkeeping and then give my spreadsheets to my accountant (worth their weight in gold).

 

HTH

Edited by Guest
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The courses mentioned by Barking are excellent and I have found the taxman to be quite helpful.

The courses are about setting up a small business and there is one on self assesment, I have done both. They are a day each, free and for anybody who is setting up or already established are very informative. Just give your local tax office a call.

 

Andy

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Thanks Barking I'll take a look to that link later.

 

The National Insurance is the contribution made for retirement, sickness and unemployment? If it is then it's the equivalent to what in Portugal we call Social Security and must pay 35% just for that no matter how low your income is...

 

Then we also have the taxes over income to be added to the expense and the contribution to the state for self-employed people can get to be 50 or 60%, plus all kinds of other taxes even if you earn 500 or 600€, and the services here can be pretty insensitive and cannot give you a straight answer. Ask five state workers the same question and you get five different answers...

 

Does Stock Photography in UK has any kind of benefits as an artistic source of income? Something like exemption for taxes for part of the income or any other benefit?

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There's no exemption as there is in Ireland, for example.

In addition to a small flat rate of social security- we call it class 2 national insurance and it gets you pension and sickness benefit (but not unemployment0 the self-employed can't qualify for that) - you also pay a percentage of your profits above about £5000 as class 4 NI which do not count towards pension, so it's just additional tax really.

You pay income tax starting at about at 20% on profits above about £10000.

Edited by spacecadet
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You can also voluntarily apply for VAT registration even if under the mandatory limit which may have advantanges for you.

 

Stock photographers generally can benefit quite considerably from voluntary registration, because we are normally selling to libraries, corporations or publishers who are themselves registered for VAT. So we reduce the cost of our purchases without having to asborb the VAT on the selling price, which selling mainly to the public would necessitate.

 

Alan

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The courses mentioned by Barking are excellent and I have found the taxman to be quite helpful.

The courses are about setting up a small business and there is one on self assesment, I have done both. They are a day each, free and for anybody who is setting up or already established are very informative. Just give your local tax office a call.

 

Andy

 

Andy, I can second your thoughts on the tax courses. Like you I've done both and they are excellent and very informative. Highly recommended if you are just setting up a business. As well as telling you want you have to pay in tax they will also let you know what things you can claim against tax, so reducing you final tax bill!

 

I've also been very impressed with the tax office whenever I've called them, very helpful and rang me back when they couldn't answer my query over the phone there and then.

 

John.

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I'm sure the UK is a low-cost place to run a business but for us in Scotland, for example, we may pay zero business rates but have heating costs perhaps three times that of a household in London, or five times that of Portugal. The two big negative factors here are property and energy prices. Gas and electricity probably don't cost any more than in Portugal, we just have to use much more. Your tax and social insurance rates are extreme and it's easy to understand why there is a lot of anger towards the EU and your government. Here (as I can confirm) it's possible for a freelance photographer or a limited company owner to live fairly comfortably and pay just a few hundred pounds in tax each year.

 

David

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I'm sure the UK is a low-cost place to run a business but for us in Scotland, for example, we may pay zero business rates but have heating costs perhaps three times that of a household in London, or five times that of Portugal. The two big negative factors here are property and energy prices. Gas and electricity probably don't cost any more than in Portugal, we just have to use much more.

 

David

a little off topic (about energy consumption) but worthwhile to read:

http://www.wired.com/wiredscience/2013/11/vaclav-smil-wired/?mbid=synd_gfdn_bgtw

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I'm sure the UK is a low-cost place to run a business but for us in Scotland, for example, we may pay zero business rates but have heating costs perhaps three times that of a household in London, or five times that of Portugal. The two big negative factors here are property and energy prices. Gas and electricity probably don't cost any more than in Portugal, we just have to use much more.

 

David

a little off topic (about energy consumption) but worthwhile to read:

http://www.wired.com/wiredscience/2013/11/vaclav-smil-wired/?mbid=synd_gfdn_bgtw

 

 

..but very interesting all the same.  I had to look up swings for fences though! ("Smil is an ambitious and astonishing polymath who swings for fences")

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Can anyone please simulate how much someone earning 9.184£ of gross yearly income will pay in Taxes, Social Security contributions and any other eventual mandatory expenses as a retirement pension contribution a self-employed worker must pay in UK?

 

Ignore any deductions that may exist, consider 0 children and not married and the fact that if 9.184£ is enough for a person to make a living in UK, just to simplify the comparison with what a Portuguese must pay with a similar income.

 

I'm asking this because I found several UK tax calculators and despite the results being similar between them the difference is so HUGE when compared to Portugal that I'm shocked to the point I'm physically shaking. Not even kidding. I just need to know if the results I saw in the calculators are right!

 

In the Portuguese calculators a self-employed person with 11.000€ (9184£) of gross yearly income will pay yearly in Taxes + Social Security contributions a total of: 3.592,56€ / 2.9856.50£

 

Social Security: 2233,56€ (1.856,80£)

+

Tax over Income (IRS): 1359,00€ (1.129,70£)

 

Can someone tell me how much someone in the UK would pay with this income? In 2014 these taxes will substantially aggravated in Portugal as announced.

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Probably very little. That sort of earnings (if you can call it that) is below the income tax allowance.

You would have to pay your national insurance contributions at a fixed rate and then profit over roughly 7.5k but thats only about 2-300 quid in total.

 

Its not really a like for like comparison though just comparing income tax, you need to compare overall taxation levels to get a more accurate picture.

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Probably very little. That sort of earnings (if you can call it that) is below the income tax allowance.

You would have to pay your national insurance contributions at a fixed rate and then profit over roughly 7.5k but thats only about 2-300 quid in total.

 

Its not really a like for like comparison though just comparing income tax, you need to compare overall taxation levels to get a more accurate picture.

 

Sorry, but I didn't understand exactly what you mean. For example I don't understand what you mean with: "That sort of earnings (if you can call it that)"

 

If you mean they are too low for UK standards (I believe they might be) they nevertheless allow for a comparison. But if I use a 20.000€ income or superior the taxes here are even more severe that the ones shown for 11.000€. The monthly Social Security payment will escalate from 186€ to 248€ and the tax over income will sky-rocket.

 

Tell me what income you'd like to compare and I may give you numbers.

 

Plus, we also have a lot of extra taxes in Portugal. Since there's no real house renting market the only way people can avoid to live in the streets is to buy a house and for that we must pay a yearly tax. In my case it's over 200€ for a crappy house but it's probably going to raise. We make payments on all medical acts. Even a simple call to the Family Health Unit for the family doctor to pass a prescription for medicines related to a chronic disease will cost you 3€. Everything else is payd, consultations, exams, prescription drugs.

 

In our services bills like electricity, water, etc you are charged a Tax for the use of the underground by the companies bringing you the service charged by the municipality and, on, and on, and on. You even pay taxes over goods that have summed other taxes previously. So you pay taxes for paying taxes! The cars for example. You pay an auto tax over the base price of the vehicle, sum both (and any other appliable), and over the sum you apply a tax about  consumption like Vat.

 

There's barely anything in Portugal where you don't pay a tax or two and the deductions to taxes are almost gone.

 

The most ridiculous thing I've encountered is that in Portugal Death Certificates have an expiration date and last only a few years!!!! If my mother needs to prove my father is dead by some reason she needs to pay for a new death certificate every time because the one she has, has expired...

 

I understand that there are more taxes in UK but from what I've been hearing I think we pay more in Portugal.

Edited by Jose Elias
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Seriously? Over 7000 out of an income of 11000? That's 65%!

The tax allowance here has increased greatly in the past few years and is now nearly £10000/€12000 so you pay nothing below that except, as radharc says, a few hundred in social security.

Even under the last government you would have paid less than £1000.

Edited by spacecadet
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The most ridiculous thing I've encountered is that in Portugal Death Certificates have an expiration date and last only a few years!!!! If my mother needs to prove my father is dead by some reason she needs to pay for a new death certificate every time because the one she has, has expired...

 

How odd. It's not as if you don't stay dead.

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Seriously? Over 7000 out of an income of 11000? That's 65%!

 

A self-employed worker earning 11.000€ (9184£) will pay in the end of the year a total of 3.592,56€ (2.9856.50£) in taxes and contributions over the income. So, the worker will keep 7407,44€ (+-8888£) of all earned.

 

These are only the taxes over income. As mentioned before there's a whole array of taxes in every thing you do in Portugal. And the cost of living is similar to UK. In fact I've frequently bought goods from Amazon UK because they waaaay cheaper than buying the same here. And I'm even talking about groceries like lentils, Pesto sauce, etc!!!!!!

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The most ridiculous thing I've encountered is that in Portugal Death Certificates have an expiration date and last only a few years!!!! If my mother needs to prove my father is dead by some reason she needs to pay for a new death certificate every time because the one she has, has expired...

 

How odd. It's not as if you don't stay dead.

 

 

The Portuguese government doesn't seem so sure...

 

And this is true. I myself had to by a new death certificate when I sent a car in my father's name to the junk-yard and to cancel them from the authorities list as a circulating vehicle. When I got there they said I should get a new one because that death certificate had expired. I thought they were joking... but on analysis of the document... they weren't...

 

When we get to this level, you start to realize the madness around here...

Edited by Jose Elias
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Probably very little. That sort of earnings (if you can call it that) is below the income tax allowance.

You would have to pay your national insurance contributions at a fixed rate and then profit over roughly 7.5k but thats only about 2-300 quid in total.

 

Its not really a like for like comparison though just comparing income tax, you need to compare overall taxation levels to get a more accurate picture.

 

Sorry, but I didn't understand exactly what you mean. For example I don't understand what you mean with: "That sort of earnings (if you can call it that)"

 

If you mean they are too low for UK standards (I believe they might be) they nevertheless allow for a comparison. But if I use a 20.000€ income or superior the taxes here are even more severe that the ones shown for 11.000€. The monthly Social Security payment will escalate from 186€ to 248€ and the tax over income will sky-rocket.

 

Tell me what income you'd like to compare and I may give you numbers.

 

Plus, we also have a lot of extra taxes in Portugal. Since there's no real house renting market the only way people can avoid to live in the streets is to buy a house and for that we must pay a yearly tax. In my case it's over 200€ for a crappy house but it's probably going to raise. We make payments on all medical acts. Even a simple call to the Family Health Unit for the family doctor to pass a prescription for medicines related to a chronic disease will cost you 3€. Everything else is payd, consultations, exams, prescription drugs.

 

In our services bills like electricity, water, etc you are charged a Tax for the use of the underground by the companies bringing you the service charged by the municipality and, on, and on, and on. You even pay taxes over goods that have summed other taxes previously. So you pay taxes for paying taxes! The cars for example. You pay an auto tax over the base price of the vehicle, sum both (and any other appliable), and over the sum you apply a tax about  consumption like Vat.

 

There's barely anything in Portugal where you don't pay a tax or two and the deductions to taxes are almost gone.

 

The most ridiculous thing I've encountered is that in Portugal Death Certificates have an expiration date and last only a few years!!!! If my mother needs to prove my father is dead by some reason she needs to pay for a new death certificate every time because the one she has, has expired...

 

I understand that there are more taxes in UK but from what I've been hearing I think we pay more in Portugal.

 

 

9k is below the minimum wage here for a full time worker. Its about 30 hours a week on minimum wage so you couldnt live on that here...

As for extra taxes, well my rates (yearly house tax) are about 1000 euro. That would get reduced if you were on a low income but you probably would still pay more than the 200 euro.

Prescriptions are free here in NI but up until recently were about 7-8 quid but again I think you may get reductions on a low income and you can pay for a year bulk prescription for about 100 quid.

Fuel is about 10-20% dearer here and we are also car taxed etc etc. Heating, electric etc are a lot more expensive here and we use more and these are all things that they get the tax back on the low income.

So its pretty much swings and roundabouts. At the level of income you quoted you would pay less income tax here but then again you couldnt afford to live here!

No matter which government, no matter what happens they will all relieve you of your income. Its the way it works, you are just renting space ;-)

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Ah, I see, I double-counted. So the effective rate is about 33%. Ours would be under 3% but at €20000 it would be somewhat more. Probably around 15%.

 

At 20.000€ (16.666£) you'd pay a 37% tax over income, plus 248€ (206£) per month for social security.

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9k is below the minimum wage here for a full time worker. Its about 30 hours a week on minimum wage so you couldnt live on that here...

As for extra taxes, well my rates (yearly house tax) are about 1000 euro. That would get reduced if you were on a low income but you probably would still pay more than the 200 euro.

Prescriptions are free here in NI but up until recently were about 7-8 quid but again I think you may get reductions on a low income and you can pay for a year bulk prescription for about 100 quid.

Fuel is about 10-20% dearer here and we are also car taxed etc etc. Heating, electric etc are a lot more expensive here and we use more and these are all things that they get the tax back on the low income.

So its pretty much swings and roundabouts. At the level of income you quoted you would pay less income tax here but then again you couldnt afford to live here!

No matter which government, no matter what happens they will all relieve you of your income. Its the way it works, you are just renting space ;-)

 

 

I understand all you've said. The 11.000€ was just an example and actually not my household income in case you're thinking it, which is higher.

 

But as spacecadet mentioned that for a 20.000€ you'd be paying 15% while in Portugal we pay 37% plus 12*248€ payments for Social Security as self-employed. And despite the higher prices in some things in UK, many cost the same or less than in Portugal and there are a lot of advantages in others.

 

Through Amazon the only things that costs the same or very slightly more are TV's, Hi-Fi's and computers. Everything is generally so much cheaper that even when Amazon applies the 23% to the announced prices to comply with Portuguese tax law they are still much cheaper in most cases than if we bought them in Portugal.

 

So, generally speaking I think that the cost of living may be much lower in UK (dependant on the chosen area obviously). Some taxes, fuel and heating may be higher but the taxes over income are astonishingly lower and groceries, Healthcare and even Public Transportation too.

Edited by Jose Elias
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You can earn up to £9,440 without paying any tax in 2013-14. Between £9,441 and £32,010 you would pay 20% tax, £32,011 to £150,000 40% and 45% above £150,000, plus National Insurance contributions.

 

Of course you can offset some expenses against tax to minimise how much tax you would pay.

 

John.

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The UK government does very badly in tax revenue from people like me. We did the 'property ladder' thing between 1976 and 1988, and formed a limited company in 1987. In the 1980s and 1990s the taxman did really well from our business. We paid more tax than we got to keep, and that is painful - and our employees of course got twice as much in total as we did as owners of the business, because it was a small business and we paid fair salaries and expenses. Overall we'd have three or four times the outgoings, from our margins, compared to our earnings as directors.

 

Now - we live happily just above the official minimum wage, anyone knowing our location/property etc would assume we were on large salaries. But we're not. As a statistic, we actually LOWER the average UK wage (Shirley and I both come in well below the stated average wage). I'm afraid I know many property-owning friends of a similar age (50+ and beyond into retirement) who are perfectly comfortable, and apparently well-off, while earning figures that would not help a college leaver even rent somewhere to live. And they contribute very little or nothing to tax revenues. Portugal may actually have the right formula - not that I am keen to see the UK change in the same direction.

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