After hearing many times that the UK system is much better for low-wage self-employed earners, I decided to do a quick comparison of the differences versus comparative benefits in tax rates for a self-employed person in each country. I tend to just write about what I know, so this comparison is based on someone who would be in my situation – a young woman doing the type of work I do (online marketing, translation and writing web copy, in case you’re interested).
Here’s the results:
The cost of being self-employed: Spain v UK
Spain
See this article for info about what each type of tax is for.
Costs
- Social security – around 50€/month for the first six months, rising to 130€ for the next six months, rising to 180€ from months 12-15 and 250€/month from then on
- VAT – 21%
- IRPF – 9% of what you earn is retained by companies, rising to 21% after the first couple of years.
- IRPF – Those of you with clients overseas (like me!) retain 20% of your profits to pay in to the Government. If over 70% of your clients retain IRPF for you, you don’t have to pay this. A percentage of the IRPF you pay in will possibly be returned to you, and you can offset the IRPF you’re taxed here against the 9/21% Spanish clients hold back for you.
Benefits
- 16 weeks paid maternity leave (around 850€/month)
- No unemployment benefit
- Paid sick leave (around 510€/month for day 4-20 and 640€/month from then on)
UK
Costs
Figures here are highly approximate, as I don’t quite understand the UK system as well and am just going on what I’ve been told. My sources say that your taxes (presumably not including VAT) come to around 20% of your earnings.
- VAT – 20%
- Council tax (say £1000/year)
- Income tax – 20% on earnings over £8,500/year
- NI contributions – Say £10 per week
Benefits
- No paid maternity leave
- No unemployment benefit
- No sick leave
Would be great to hear from readers from both countries if they think these figures sound about right. In any case, I hope it gives you a rough-and-ready idea of the different systems and what you’re up against in both. Which system would you prefer to work under?
Text and photos by Penelope
