Talking tax: our lawyers have more freedom over the money they earn with nexa

Talking tax: our lawyers have more freedom over the money they earn with nexa

As the Chancellor of the Exchequer delivers his spring statement we thought now would be a good time to talk about tax – but we promise it won’t take long!”

Employment status

As a new model law firm, we often refer to our lovely lawyers as self-employed consultants – and there’s no question that nexa’s lawyers enjoy the organisational freedoms and flexibility of being their own boss.

But, when it comes to matters of taxation, our tax specialist Femi Ogunshakin is keen to point out that the label “self-employed” is a bit of a misnomer:

A better label is probably ‘independent contractor’ because most lawyers at nexa provide their services through a limited company. This means that they are ultimately employed by that corporate entity

Will I be better off being my own boss?

If you have only ever been an employee, you will have had tax and national insurance contributions deducted at source through the PAYE (pay as you earn) system by your employer.

This system is very rigid, as a taxpayer you have no choice and no discretion about what and when you pay.

Working with nexa as an independent contractor, you enjoy several differences in the way you are taxed when compared to being an employee. Depending upon your own circumstances, these may be particularly helpful to you. For example:

  • You control your income. You decide how much to work and how much to pay yourself, so you can respond to changing needs.
  • You control the status of your drawings. You can decide to take a smaller percentage as salary and a larger proportion as dividends for example. This would enable you to benefit from different tax rates.
  • You don’t need to take an income at all. Again, depending on your circumstances, you may wish to pay all your income (but generally only up to a limit of £40,000 year) into a pension. Alternatively, you may decide to build up the capital reserves in your service company and use this for a capital purchase later on.
  • The rules around expenses are different when you are not subject to PAYE. Generally there are more opportunities to claim back for business expenses.

Last but by no means least…

Over to Femi again:

The most important thing to remember is that everyone is different and everyone’s circumstances are different, it’s therefore really crucial to talk to a tax expert early on and get the right professional advice – it’s always a good (tax deductible) investment!”

Nigel Clark, CEO of nexa adds:

Our primary objective is to ensure that the nexa model operates in compliance with the current legal requirements specified by HMRC. Our consultants are responsible for administering their own companies through which their services are supplied and completing and filing their own tax returns and other corporate documentation.”

Disclaimer

This article is for information purposes only. It should in no way be considered legal advice and no reliance should be placed upon it. All readers are urged to take their own professional tax advice regarding their own specific circumstances.