Working full time + freelance how does my tax work?

Question

Hi I work full time earning £21,000 and currently in discussion to start doing some freelance website work on the side for 1 single client. They want me to invoice them monthly and they will be paying me between £250-450 a month (not agreed it with them yet) direct to my account.

What I need to know is what I need to do re tax etc as I've never done freelance work and always been employed full time so really confused. I guess from reading other questions I have to register as self employed (yet whilst also having full time employment as I will continue my normal job).

As I will only be earning £250 (maybe £450) a month and will be the same set amount a month I am worried I will loose it all up in tax, like I pay over that in tax for my full time job. Or does it work that I will pay very little tax as I will only be getting £3000 a year from this freelance work?

Any help would be much appreciated, I am going to call HMRC in the morning but wanted something to ease my mind now.

Than

Answer 1

IN ENGLISH??!!

Answer 2

Hi, I am an accountant and in a similar position.

I assume your salary is PAYE therefore taxed at source, so no need to worry about that.

However, your additional income on a self-employed basis will be liable for more tax at 20% this tax year.
You need to let HMRC know your are also self-employed using form CWF1 available on their website.

This will mean that they send you a tax return each year.
If you start earning over £34,600 you MAY have to pay tax at 40% on the earnings above that, but from your figures that will not be the case.

NOTE: You will be able to offset many costs against your self-employed income e.g. a share of Computer, car, office space, heating, postage, telephone and any other cost connected with doing your s/e work.

Say you earn (s/e) 8k and have 2 k of costs, you will have to pay tax at 20% on 6k. If you save 20% of your income in a savings account, then when you come to settle your tax bill you should have some left for yourself.

As for NI, you may have to pay a small additional amount for your self-employment, I haven't checked this out myself yet.

Answer 3

Contact IR. Tell them you are going to be doing some s/e work, but will still be employed. They will probably say that your NI stamp is okay being paid through your PAYE. As for tax, they will probably leave your tax code alone, and you will be asked to pay tax on your s/e earnings when you fill in your annual self employment tax return.
If you are working for yourself, you will have to fill in a return every year - you will also send in a supplement about your employed earnings and tax, and provided you return it by Sept every year for the year ending the April of the same year, they will calculate your tax to pay and send you the bill for you to pay by the following Jan 31st. As your employment will calculate your tax on your full tax code, you will always have to pay some tax on s/e.
To give you an idea: I earnt £2915 PAYE and £4242 s/e. Personal allowance is £5035, so my taxable earnings all year was £2122. I paid £212.20 tax, which is 10%. It will be more if you are in a higher tax band ( which most people would be)
Sorry. Alot of info - hope you can decifer it.

Answer 4

You need to register with the Inland Revenue that you are self employed and then make voluntary national insurance contributions. They will send you a self assessment form when you need to fill it in. If you fill it in online it is really easy. You need your p60 from your current employer and then how much you have earnt from self employed, they will then tell you how much you need to pay tax. Being self employed you can off set your tax against things like a computer, software.

Answer 5

what The Great Escape said, they are two different forms of income tax

Answer 6

Just one suggestion. Get a good accountant to advise you on your tax affairs he may well save you at least his fees