Tax on second income - HELP!

worriedtaxpayer

Hi there,

I have a full time job as a designer, earning £31,000 a year before tax. Lately I've been offered freelance design work to earn some extra cash in the evenings and weekends, nothing major, £200-£300 at a time. I'm worried about the tax issues on this though. Will i have to pay tax on it? Will my current employer find out about it? I don't want to get into trouble from either the tax man and also my boss as they may not approve of me doing extra work!

Is there a limit you can earn in the year that you don't need to pay tax on? Do I have to declare it anyway? Will it affect my child benefits even though it's occasional work?

If anyone can answer some of these then I'd really appreciate it!

CLAPTON

yes you do have to pay tax and potentially NI?
yes you do have to declare it
How much do you expect to make each year?
Your employer won't be informed via the tax system
No idea about child benefits

Quentin

You don't pay tax on your freelance earnings - only on your profit.

Your current income means that you will have already been using your tax free allowance, so you will pay tax on every pound of profit the freelance venture makes.

worriedtaxpayer

That clears a lot up, thanks!

tyllwyd

Child benefit is not means tested so that wouldn't be affected. If you claim tax credits, then yes, those would be affected.

I think you'd probably need to register as self-employed for the freelance income (although it is a grey area, and you should check that you do qualify as self-employed) - there is some guidance on the HMRC website. I'm not sure if your employer would find out that you were doing work on the side, but I think you should work on the assumption that they might, and if that would be a disaster then don't do it! It might be forbidden by your contract of employment - its worth checking.

For tax credits, I'm not sure how it would work for you, but I'm self-employed and I have to give them my annual income when they send out the form in the Summer, and they then adjust our tax credits accordingly. I get very confused about why they are paying me what they are paying me! but be warned that the impact of what I'm earned doesn't seem to be felt until later, so if you are doing extra work and relying on tax credits, make sure you don't get caught out by a drop in tax credits that relates to money you earned and spent a long time before.

dazza.mk

You will need to register as self employed with HMRC and if you think that your second job in isolation will bring iin under £4,825 you can register for a Certificate of Small Earning Exemption to avoid NI Class 2 payments

see first post for all details:

http://forums.moneysavingexpert.com/showthread.html?t=1218145