Freelance Designer -& Full Time Designer

craig.5br

Hello..

Recently a few things haven't gone my way.... well the whole year has not..

But I'm trying to keep positive with the whole situation.. Im im currently working as a full time designer but wanting to do some freelance on the side, will i need to contct the tax office telling them that i am doing this and will this effect my tax code? so basically what i am asking will i be better off or worse off for doing some freelance on the side?

hope some one can help on this topic.

Many thanks

PlutoinCapricorn

Many people who are in full employment also do freelance work: it tops up their income and may be something to fall back on.

The first thing that comes to mind is a possible conflict of interest, as design is involved. What does your contract of employment say about this? They would not like it if you worked for the competition.

craig.5br

I have never signed a contract in the place that i work so im guessing they could not really object to me doing extra work, I would not contact any of the competitors of the company that I work for obvious reasons.

do you think i should make hm revenue aware of me doing extra work?

thanks

PlutoinCapricorn

In theory, what you do with your time away from work is your own business, but helping the competition or being too tired or distracted to concentrate on your main job are potential problems.

The first step now is to look at https://www.businesslink.gov.uk: lots of useful information and free workshops.

You are right about registering with HMRC as a Sole Trader, the best time to do this is when you get your first freelance assignment. HMRC do not want thousands of people to register just on the offchance then find that things do not work out and they do not get any work - I hope that this makes sense.

Any freelance work that you do will not affect your tax code, which applies only to tax collected under the PAYE system. You pay National Insurance and Income Tax on freelance earnings separately If your freelance earnings are under a certain amount, you will not need to pay NI. You can offset legitimate expenses against freelance income: you pay income tax on your profit. Unless you reach the higher rate earnings band, the income tax on freelance profit will be 20%.

craig.5br

thanks for all your help there, but one more question :-) would freelance not be classed as a second job? which result to me being taxed heavily?

thanks again

fengirl_2

Second jobs, whether employed or self employed are not taxed more heavily - I dont know where this idea comes from. As a self employed person, you would pay 20% tax on your profits and 8% class 4 NIC on any profits over £5035. This is no more than you would pay on a second employed job or on any overtime payments you received.

PlutoinCapricorn

Are you thinking of the Personal Allowance Craig? This is the amount that you can earn before you start paying income tax, currently approx. £6,475. You only get one PA, so it will be used up on your main job and all of your freelance profit would be taxed.

You are the only person who can decide whether it is worth the effort: 20% tax is not too bad really. And being taxed on profit rather than on income is a plus point.

berkshirelady

Hi there, registering as a sole trader is pretty easy, and these days I get the shortened version of the self assessment tax return each year, which is only a few pages long, and much easier than the full return. I also have an NI exemption certificate as my freelance earnings are under the threshold. This was easy to organise, too.

it's definitely worth doing, and can be easy to manage. I keep track of all my extra income and tax-deductable expenses on one simple spreadsheet so that I can plug the figures in to the tax return each year. and keep all your receipts!

You can get guidance from HMRC on what can be counted as tax deductable expenses. And if you have a bad time while starting up, and register a net loss on your freelance income v expenses, a tax rebate would be on the cards.

One good tip is not to be too specific on how you register yourself. I prefer to do print design work, but registered myself as doing 'promotion and marketing'. This has enabled me to take on other bits of work, e.g. supermarket sampling and sales/marketing work for an estate agent, without having to register a change to my business to HMRC.

I hope this helps. I am no expert, and generallyquite rubbish when it comes to bureaucracy, but I have managed to top up my income over the last 3 years without too much hassle. it was quite intimidating to start with, but once you get to grips with it, it's fine. I wish you the best of luck, and I hope you get loads of work! you never know, you might do so well, you'll end up working for yourself full-time.

go for it