TL;DR - A basic overview on how equivilant salaries equated for salaried & self employed people. If you go self employeed you can pay less tax. You may have security or freedom. You can't have both.(unless you're super weathly)
I've tried to keep the maths as simple as possible, but reintroduction of figures is needed at points. Hopefully it doesn't trip people up. If it does, get better at maths.

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Following on from a previous post I will outline a way in which the United Kingdom Tax system does this (HMRC) Comparing purchases & lifestyle choices made by a salaried employee vs. that of someone who runs a LTD company (1 employee/freelancer).

I’m going to first set out a few key points that the future information will be built around.

1) The pre-tax salary or profit will be £30,000. This as of 2019 is the average full time salary in the UK.

2) It is based of you paying £250 per month into a private pension. (10% of pre-tax salary)

3) I’m assuming the individual is single & has 0 dependents. So it keeps tax credits out of the equation.

4) There are no student debt repayments to be made.

5) They are sharing a house with one other individual.

6) Food is calculated at £60 a week. Avg £260 per month.

7) They have no car.

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The average rent, council tax & basic bills in the UK are £650.14 (£483.5, £69.63, £97.01)

The salaried employee will take home each month. £1,795.
So they have £1144.86 to spend as they wish.

Taking food into account they now have £884.86 as disposable income.

The self-employed individual pays tax on a yearly basis once their EOY accounts are done.

Before this they take home £3000 a month. £719 is tax & NI free so covers any complications with paying tax on money needed for rent.

10% into Private pension.

£650.14 for rent bills etc.

They now have £2099.86.

Of this £68.69 of their tax-free allowance remains.

Depending on the business. Food expense can be run through the business. Think coffee shop etc. So your business can feed you. It’s passed as a business expense.

Accounting for food the self-employed person has £1839.86 as disposable income. £955 more than the SE. Tax will need to be paid if this remains at the end of the year.

They can now use this to help run their business by buying assets, equipment or “investment items” This can be art, computers, cars etc. It has to link into the business in someway. So you can’t buy flights to Paris with your LTR/FWB and run it through the business. Unless… There is a conference that weekend relevant to your industry.

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A short note on tax.

Dividends - You get £2000 as a tax-free dividend allowance. After that it’s 7.5% until you hit the higher rate (32.5%, >£50k total earnings p/a)
Income Tax & Ni – Whatever is remaining you’ll owe as if you were a normal salaried employee.

To minimise the tax you pay you can some of the following through your business;

Car, car insurance, fuel, Tv, computers, “Office” Furniture, flowers for your mum.

VAT – Value added tax

You’ve seen those pissy feminist banging on about paying 20% tax on tampons? Well that’s VAT.

If you’re business is VAT registered then you get to claim that additional 20% back on a monthly or quarterly basis. It’s on a lot of products which is really shouldn’t be. It was originally intended for “non-essential” goods.

It features on adult clothes, fuel, toilet roll, soap, shower gel, most electronic items etc. Just ask for a VAT receipt when you next go to the supermarket and see how much you’re giving to HMRC for basic products.

When you run them through your business this is where you get a nice double bonus.

1) You can offset this as a business expense and reduce your personal tax bill. As you have less profit.

2) You get the VAT refunded.

E.g. 1

You have to buy a new computer for you business. It costs £409. £68.17 of that is VAT.

As a cost to a business it’s £340.83.

For the private individual to do this it costs £409. However if you recalculate it to pre-tax earnings, the true cost of what you need to earn. Then it is somewhere in the region of - £511.

Formula
(Pre tax earnings/post tax earnings) = (Pre tax computer / post tax computer)

You’re paying tax twice. Once for your earnings & a second time on VAT.

Finally to compare the two tax bills on the £30000 earnings. For ease of calculation.
1) They both spend £884.86 of their income/business expense.

2) They live equivalent lives.

The Salaried employee has £0 left. But all tax & NI is paid. £5462 in total.

The self-employee has £17381.68 in “profit” including their tax-free allowance. £2000 for dividends has already been removed.

They pay £396 in tax for the year. £1063 in NI. A total of £1459.

Just by a simple change in employment status the difference is £4003. Both have £3000 in a private pension & a £750 HMRC contribution. No personal savings however.

I’ve left out some obvious elements

1) No sick pay for self employed persons.

2) You’ll probably need an accountants help with some things.

3) If your business is VAT registered then some work e.g. consultancy is VAT applicable. So can mess with your VAT refunds.

4) There are some worker protections for employed staff. However these are being eroded in the UK.

That’s a very basic overview of how tax works. I’m not an accountant so these figures won’t be 100% but are an example of how it works.

Any questions, just ask.