Following on from Mr Sunaks statement yesterday there, strangely, seems to be a lot of confusion out there regarding whether people are classed as employed or self employed? Where does a director fit in? And what does that actually means for you. We will try to explain…
If you are employed there is a paid work agreement between an employer and employee. You are hired to do a job for a salary or fee and can be terminated by the employer. Employees also have rights and benefits.
You are considered self employed if you run the business for yourself and take responsibility for it’s success or failure. You:
- Aren’t paid through PAYE
- Don’t have employment rights or responsibilities
- Have possession of the business assets
- Are responsible for debts and other liabilities
- Your profit and loss is combined with other income for tax purposes
Typically, the owners and/or shareholders of a limited company are protected from the liabilities of the business. Directors are typically considered employees. Directors are not self employed. You can hire other people to manage the day to day things but you are still legally responsible for your company.
By taking a combination of a small salary and higher dividend payments, you could pay significantly less personal tax than you would if you were self employed.
For single director companies, we don’t believe furloughing is possible. But for companies with 2 or more directors furloughing could be possible.
Yesterday Rishi Sunak told the Self Employed “You have not been forgotten”.
Self Employed workers will be able to
- Apply for a grant of up to £2,500 a month to help them cope with the financial impact of Coronavirus.
- The money will be paid in a lump sum
- This may not be available until the beginning of June
- Self employed encouraged to sign up for Universal Credit to help in the meantime
- You must already have been registered as self employed
- The grant will cover up to 3 months but may be extended if necessary
- Anyone that has not completed their 2019 tax return encouraged to do so immediately in order to be able to apply
We promise to endeavour to help you in any way that we can through this time to be able to access the funds you need to survive both personally and as a business.