Self-employment - Independent Contractor - Best Route?

Hi all! I'm an independent contractor working in the UK on a spousal visa (FLR). I'm an online educator, teaching and designing curriculum remotely. My income is currently from different countries - USA and China, but I am paid in $USD. Any advice about whether I should register with HMRC as a sole trader, partnership, or limited company?

My main worry is filing taxes; 2017 will be complicated year because I lived in the states for a part of the year while waiting for my visa. I have done all of my work remotely, but have not yet paid any taxes.

I spoke with an accountant group about their fees for setting up and maintaining LCs (110-190 monthly). Their services are in excess of what I need and out of my price range. Since it is just me working by myself from home, perhaps sole trader is the better route to take? Does anyone know of affordable accountant services or ones that just provide tax assistance?

Thank you for any help and insight you can provide!

Bad advice in this area has cost me no end of hassle. You need to set this up very carefully.  I can’t tell you how as I am not qualified.

Bad advice in this area has cost me no end of hassle. You need to set this up very carefully.  I can’t tell you how as I am not qualified.

Thanks for your reply, Jimbocz. It does seem like 'tread carefully' territory! If you don't mind sharing, can you tell me your experience so that I can learn what to avoid?

Well, I followed financial advice to set up a limited company and have a business bank account.  This was perfect advice for a Brit from British financial advisors.  When I asked them if it mattered that I am American, they said no when they really meant they had no idea.  I’m not certain but I should have avoided having bank accounts in my name and not had a limited company in my name and most likely not set up life insurance the way I did.  I’m not sure because I am putting off finding out the true horror of my situation. 

I do basically the same job, and I am a sole trader. The only difference is I work for a British company and am paid in pounds. In the past, I worked for a Spanish company and one based in Hong Kong, but they paid in pounds too. Not sure if the currency makes a difference, but just saying .

My contract with my current employer lists me as an independent contractor. Also not sure if that makes a difference. However, I did contact HMRC directly last year, and after a lot of faff they basically confirmed that I should be a sole trader and don't need to set up my own company. It's the easiest option anyway, so that was good news.

I wasn’t very clear, my problems are with the Americans.  The British love me as I pay  more tax than Facebook some years.

I wasn’t very clear, my problems are with the Americans.  The British love me as I pay  more tax than Facebook some years.

Aren't we all paying more tax than Facebook?

I did contact HMRC directly last year, and after a lot of faff they basically confirmed that I should be a sole trader and don't need to set up my own company. It's the easiest option anyway, so that was good news.

Thanks so much for sharing, historyenne! It does sound a lot easier than setting up a bank account, company articles/documents, insurance and more. It sounds like that is some of the hassle you've been through, jimbocz. I really appreciate both of your insight because it is a complex issue and the financial advisors did seem quick to want to set me up without knowing anything about my 'business.' Perhaps sole trader is the way to go.

Hopefully you at least reap some tax reduction/ write-off benefits, jimbocz?! (bills, materials, etc.)

I do basically the same job, and I am a sole trader. The only difference is I work for a British company and am paid in pounds. In the past, I worked for a Spanish company and one based in Hong Kong, but they paid in pounds too. Not sure if the currency makes a difference, but just saying .

Sorry - another question historyenne - does that mean that even if you're a sole trader and  you take on different contracts, you don't have to change your registration with HMRC? For example, if I did independent contractor work here in the UK, would that change/ complicate things?

Sorry - another question historyenne - does that mean that even if you're a sole trader and  you take on different contracts, you don't have to change your registration with HMRC? For example, if I did independent contractor work here in the UK, would that change/ complicate things?

You should take anything I say with a grain of salt because I am by no means an expert, but my understanding is that sole traders can contract with multiple clients/employers in different locations and as long as you report your income from all sources there shouldn't be a problem.

Thanks so much for sharing, historyenne! It does sound a lot easier than setting up a bank account, company articles/documents, insurance and more. It sounds like that is some of the hassle you've been through, jimbocz. I really appreciate both of your insight because it is a complex issue and the financial advisors did seem quick to want to set me up without knowing anything about my 'business.' Perhaps sole trader is the way to go.

Hopefully you at least reap some tax reduction/ write-off benefits, jimbocz?! (bills, materials, etc.)

Those financial advisers were most likely only thinking of your reporting and tax obligations to the UK.   They most likely have no idea about your obligations as an American, and how that might impact how you should set things up here. 

Sole trader might indeed be right for you, but you need to seek advice from a professional who knows about US taxes.  I wish someone had given me this advice 15 years ago.

Having run into a similar situation at jimbocz (although for a much shorter time period) due to getting advice aimed at Brits who don't have to pay US taxes, my hunch as a non-tax provider and expert is that being a sole trader would be your simplest option. After talking to a couple of expat advisers I'm seriously considering closing my UK Limited Company and going back down the sole trader route myself to minimise my future US tax hassles.

The one negative to being a sole trader is that your personal assets are at risk if you get sued, which is not the case if you incorporate.

Thank you very much, AncestrySpouse. It is difficult to find international specialists in this area but I've looked up a few. It's all a bit daunting! Thanks again for all of your input.

Having run into a similar situation at jimbocz (although for a much shorter time period) due to getting advice aimed at Brits who don't have to pay US taxes, my hunch as a non-tax provider and expert is that being a sole trader would be your simplest option. After talking to a couple of expat advisers I'm seriously considering closing my UK Limited Company and going back down the sole trader route myself to minimise my future US tax hassles.

The one negative to being a sole trader is that your personal assets are at risk if you get sued, which is not the case if you incorporate.