CONTRACTING IN THE UK
The UK is a popular choice with foreign nationals looking for contracting opportunities. As one of the three largest economies in Europe and with London the largest and probably the most dynamic city in Europe and English as the language, its attractions are evident.
With excellent communications from across the globe, the UK offers a wealth of choice for contractors.
Before deciding to move, you should fully assess your options, and here we are covering some of the critical questions for contractors looking at the United Kingdom for their next project.
WHAT ARE THE BENEFITS OF WORKING IN THE UK?
The top three benefits of working in the UK are:
1/. It is one of the top three European economies;
2/. The United Kingdom has been the leading recipient of inward investment for access to the European market, and many multinationals have based themselves there;
3/. The UK has a well-deserved reputation for ease of doing business.
MAXIMUM SALARY RETENTION IS IMPORTANT TO ME; HOW MUCH WILL I TAKE HOME?
The maximum salary retention you can achieve in the UK depends on how you choose to work. Contractors locally employed with Access Financial enjoy around 60% retention while those working through their limited company (personal service company) can achieve up to 75% (based on a day rate of £500). Self-employment is not a standard structure for contractors, and HMRC has made it problematic for those offering their consulting services.
These figures are guidelines as many factors influence the outcome, including individual circumstances such as dividends paid, rate of pay, marital status and business expenses that you can claim.
WHAT ARE THE LEVELS OF TAXATION IN UK?
Residents and non-residents in the UK pay income tax on a progressive scale up to 45%.
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,500||0%|
|Basic rate||£12,501 to £50,000||20%|
|Higher rate||£50,001 to £150,000||40%|
|Additional rate||over £150,000||45%|
WHAT ARE SOCIAL SECURITY REQUIREMENTS IN UK?
Social Security is known as National Insurance Contributions (NICs) in the UK.
The Employer rates and thresholds in 2020/2021 are:
Category letter £120 to £169 (£520 to £732 a month) £169.01 to £962 (732.01 to £4,167 a month). Over £962 a week (£4,167 a month)
The Employee rates and thresholds in 2020/21 are:
Category letter £120 to £183 (£520 to £792 a month) £183.01 to £962 (£792.01 to £4,167 a month). Over £962 a week (£4,167 a month)
Most contractors will pay Class A rates.
How do you obtain an NI number if you’re moving to the UK?
If you have a biometric residence permit (BRP), you might have a National Insurance number already – it will be printed on the back of your BRP if you do.
If you do not have a National Insurance number, you must apply for one if you plan to work. You can only apply once you’re in the UK.
How to apply:
Due to coronavirus (COVID-19) you cannot currently apply for a National Insurance number.
After you’ve applied:
You will get a letter asking you to attend a National Insurance number interview at a Jobcentre Plus (or a processing centre if you are in Northern Ireland). The letter will also tell you which documents to bring to prove your identity, such as:
- passport or identity card
- residence permit
- birth or adoption certificate
- marriage or civil partnership certificate
- driving licence
At the interview, you will be asked about your circumstances and why you need a National Insurance number. You’ll also be told how long it will take to get your National Insurance number.
HOW DO I REGISTER LOCALLY IN THE UNITED KINGDOM? WHAT LOCAL REGISTRATION DO I NEED?
There is no population register as such in the UK, and no local registration is needed, unlike in most other European countries.
Until December 31st 2020, to live and work legally in the UK, EU/EFTA nationals do not need a work permit.
DO I NEED A PERMANENT ADDRESS IN THE UK?
JobCentre Plus will ask you for a living address in the UK.
IS THE PROCESS FOR CLAIMING EXPENSES DIFFERENT IN UK? WHAT’S COVERED/NOT COVERED?
Under UK law employed taxpayers may claim against their tax bills expenses incurred wholly, exclusively and necessarily for that employment.
By contrast, self-employed persons, including those using their limited companies, can claim expenses wholly and exclusively for that trade.
Contractors who are subject to their clients’ Supervision, Direction and Control may not claim travel and subsistence costs.
CAN I USE MY OWN COMPANY?
Until April 5th 2021, working under your own PSC is entirely acceptable in the UK in the private sector. The limited company must determine the status of the contractor, who is both director and shareholder to his company. This arrangement is due to change on April 6th 2021.
At Access Financial, we offer a PSC service that localises your company in the UK and that you can work legally through your company.
WHAT STEPS DO I NEED TO TAKE TO BE COMPLIANT?
When you partner with Access Financial, your only obligation for compliance is to obtain your National Insurance Number: we take care of everything else.
CAN I PAY MY TAXES BACK AT HOME BECAUSE MY STAY IS LESS THAN 183 DAYS?
If you live in the UK for less than six months (183 days) you need only pay tax on your UK income earned in the UK which includes any rents or capital gains. If you stay for longer than 183 days, then you will have to pay UK income tax on your worldwide income.
WHAT IS THE BEST SOLUTION FOR MY CIRCUMSTANCES?
Every contractor is different, and this impacts on the solution which suits their needs. At Access Financial, we offer local employment, personal service company, and even a posted solution for contractors in the United Kingdom. Our Solutions Consultants can discuss your options with you and find the right answer for you.
I’M A NON-EU NATIONAL – HOW DOES EMPLOYMENT IN THE UK WORK FOR ME?
Non-EU/EFTA nationals can only work in the UK as employees, through a local employment solution.
If you want to find out more about contracting in the UK, please contact one of our Access Financial Solutions Consultants.