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Self-employed or on payroll? What actually changes

The offer usually arrives like this: “same money, but you invoice us”. Or better: “we’ll pay you more, but you invoice”. And the number sounds good, because a contractor’s gross always sounds better than a salary.

The honest comparison isn’t between the two numbers. It’s between what you keep and what you give up.

What eats the pretty number

Before anything else, out of what you invoice comes:

Your own contributions. Whatever the scheme is where you are, you pay it every month, whether you invoice or not.

Income tax, which on payroll is deducted before you see it and which, invoicing, you have to set aside yourself. The classic mistake: spending the quarter’s money and meeting the tax bill with nothing put by.

Sales tax, which isn’t yours even though it passes through your account. You charge it, you hold it, you hand it over. Counting it as income is one of the costliest first-year errors.

An accountant, unless you want to do it yourself.

Once you subtract all of that, the gap between “£2,200 on payroll” and “£2,900 invoicing” is far smaller than it looked. Sometimes it’s zero. Sometimes it’s negative.

What you give up, and appears in no calculation

This is the part almost nobody puts in the table, and it weighs more than the tax:

  • Unemployment cover. Whatever exists for the self-employed where you are, it isn’t the same in conditions or in amount.
  • Paid holiday. A month not invoicing is a month not paid.
  • Sick leave. Being ill has a direct cost to you.
  • Severance. A contract for services ends with notice, not with redundancy terms.
  • Length of service, training, and everything else that accumulates in an employment relationship.

Put into money, those add up to considerably more than the gross difference in most offers.

If you’re going to invoice a single client, on their hours, with their tools and under their instructions, that arrangement has a name and it isn’t “self-employed”: in most places it’s disguised employment, and while the exposure isn’t only yours, the consequences reach you.

This isn’t a technicality. It’s the difference between being independent and being an employee stripped of the rights while keeping the obligations. If your case looks like that, this is a question for an employment solicitor or your union, not for the internet.

When it genuinely is worth it

There are cases where going independent is clearly better, and none of them are about this month’s money:

  • Several clients. That’s where independence is real and the risk is spread.
  • You can scale what you charge. On payroll your ceiling is set by a grade or by your manager; invoicing, it’s set by you and your diary.
  • You value control of your time above stability, and you have enough buffer to survive a thin quarter.

Notice that none of them is “they’re offering me £700 more”.

The sums that actually matter

  1. Take the invoicing offer and subtract contributions, estimated tax and accountancy. That’s your real net.
  2. Compare it with the net of the salary, not the gross.
  3. Add to the salary the value of holiday, unemployment cover and severance. Even roughly.
  4. And ask yourself how many months you’d last if that client disappeared from one month to the next.

What asking an AI adds

The cold numbers, without enthusiasm: give it both figures and ask for the two columns. And above all, the question that won’t occur to you in the moment: “what am I not taking into account?”.

Be careful with specific figures for contributions and tax bands, though: they change every year and it’s exactly the kind of detail an AI states confidently while being out of date. Check those numbers against the official source before you decide with them.

This is where seeing several answers at once genuinely pays: if they agree on the reasoning but differ on the figures, you know which half to trust. That’s what The Judge does — several AIs answer separately and a fixed judge tells you where they agree and where they don’t, with a confidence level.

In one line

Don’t compare gross figures. Compare net against net, and add to the salary everything you only miss when you need it.