Self-employed joining payroll

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If a person was being paid by a company as self-employed and later joins their payroll, do the pay-to-date figures need to be recorded on payroll software or do we assume that this is the person's first job in the current tax year? It would also be helpful to know to determine the most appropriate option for their starter declaration.

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RLI
By lionofludesch
03rd Apr 2024 12:00

You definitely don't record his self employed income as pay from an employment unless you want to get stuck with a bill for PAYE which should have been deducted.

It's up to the employee to decide which box to tick. It's not an employer decision. The issues he might consider are is his self employment to continue and how much he will have to pay in tax when his Self Assessment bill comes along.

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By Paul Crowley
03rd Apr 2024 12:32

Get the employee to compete a new starter checklist and follow the instructions. Oddly this will give him a full personal allowance.

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DougScott
By Dougscott
03rd Apr 2024 13:14

Self-employment is dealt seperately from employmnet. If he ticks the box that says this is his only or main employment then he should get the full personal tax allowance, at least initially.

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By FactChecker
03rd Apr 2024 15:45

As others have said, in HMRC terminology S-E earnings are not from Employment (any more than Dividends or Interest from savings would be) ... so are irrelevant to you when deciding what if anything to record as YTD values in your Payroll software.

BUT please note:
*You've not said whether this person had any other Employments (with other ERs) during whichever tax year is under consideration (and there's no reason why you would know) ... which is why the Starter Checklist must be completed by EE not by you;
* You will only record 'other employment' YTD values in your Payroll if you've been presented by the new EE with a P45 from a previous employment in the same tax year for which the person will first be paid (and even then within certain constraints);
* Make sure new EE reads the Starter Checklist properly before they complete it - in particular at this time of year (when the badly worded form's phrases like "This is my first job since 6 April .." obviously have a different meaning if the new Employment starts before or after 6th April 2024)!

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By gillybean04
03rd Apr 2024 19:18

If they were paid as self-employed and are now being added to payroll then pertinent question would be were they engaged as self-employed or did they receive their employment earnings gross for some reason.

The obvious risk being that PAYE should have been operated but wasn't.

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Replying to gillybean04:
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By FactChecker
03rd Apr 2024 19:37

I was hoping that "a person (who) was being paid by a company as self-employed and later joins their payroll" indicated that something substantive had changed (the type of work / nature of the job / etc) in their relationship with the company.

But you're quite right, my desire to answer the question posed shouldn't obscure the fact that such a 'move' is not just a matter of choice - and may well act as a red flag (at some point) for HMRC to review that past period of self-employment.

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Replying to FactChecker:
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By johnjenkins
04th Apr 2024 09:41

We don't know if he has been put on the payroll as a result of an HMRC enquiry.

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Replying to johnjenkins:
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By FactChecker
04th Apr 2024 14:51

True ... but if so that puts such a different complexion on OP's question regarding treatment (or not) of the S-E "pay-to-date figures" as to make the posted question nonsensical.

All my previous responses still apply SO LONG AS the period of S-E is not in dispute ... if it is then all bets are off and OP has asked the wrong question.

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Replying to FactChecker:
RLI
By lionofludesch
04th Apr 2024 16:14

It's not unknown in the construction industry for a subcontractor to work for an employer and, if he's found to be a good worker, sign him up as a proper employee.

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Replying to lionofludesch:
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By FactChecker
04th Apr 2024 17:19

Indeed ... but I was trying, as enjoined by many on here (not mentioning TD by name), to focus on what OP actually posted - not all the other possibilities that they may have omitted through lack of knowledge or in order to hide something.

Particularly in this case where the question wording indicated a very poor/low-level understanding of how basic Payroll operates - so I focussed on clarifying (hopefully) the practicalities vs the misunderstanding.

Otherwise unknown unknowns (which are fun to explore) can become near infinite.

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Replying to FactChecker:
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By Leywood
04th Apr 2024 23:27

FactChecker wrote:

True ... but if so that puts such a different complexion on OP's question regarding treatment (or not) of the S-E "pay-to-date figures" as to make the posted question nonsensical.

All my previous responses still apply SO LONG AS the period of S-E is not in dispute ... if it is then all bets are off and OP has asked the wrong question.

We wont ever know. The OP is engaging.

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By Leywood
04th Apr 2024 10:01

Oh dear

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Pile of Stones
By Beach Accountancy
04th Apr 2024 22:47

HMRC starter checklist:

Box 8: Do you have another job? Tick Yes, Tax Code is Basic Rate
Box 8: Do you have another job? Tick No, Box 10: Have you had another job since 06/04? Tick Yes, Personal allowance Week 1 Month 1 Basis

In both cases tax is deducted until HMRC send a new tax code.

Job to me implies including self-employment.

Am I being too simple?

In any case you would only input the YTD figures from a P45, which you won't get if the employee has really been self-employed only.

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Replying to Beach Accountancy:
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By FactChecker
04th Apr 2024 23:10

You do know that the Starter Checklist is the culmination of HMRC's 'guidance' (but no form) for years, which finally resulted a while back in a form (initially only 'to help employers' before becoming formalised) ... and then revised a few times in the light of feedback?
So it surely must by now be crystal clear and unambiguous then!

Ah, you mean their inability to say 'employment' instead of the misleading 'job' ... 'nuff said.

Note: in this context 'job' does NOT refer to bouts of self-employment (or indeed earnings from any source other than employment by an employer under PAYE).

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