Questions about being self employed & working for an employer at the same time

emilyteach1

Hello kind people!

I have a few really basic questions about self-employment and the tax and NI, it'd be great if anyone could help.

I have scoured the Inland Revenue website, but it's very formal and I've ran out of patience!

I'm a part-time employed teaching assistant (3 days a week) and my salary is approximately 10k. I've recently started offering private tuition, and have earned £376 so far this financial year.

I have spent £35.84 on business-related items (stationery, ink, paper, etc.), and have kept all the receipts as proof.

I was wondering about what tax I'd have to pay at the end of the financial year. Obviously I want to earn more throughout these next few months, but I've calculated that so far I'll owe £39.96.

Is this correct? I've simply took 20% of what I've earned, and deducted the £35.84 I've spent, assuming that the IR accept these items as allowable (which I think they will??).

Would I be OK to continue working towards the 20% off (minus expenses) formula for the rest of the year? I'm using my proceeds from self-employment towards saving for my wedding, so I really want to have a reliable forecast of what I'll keep, and what I'll owe!

Also, I was wondering if I would have to pay any extra NI? I do already pay NI through my formal employment - is this enough (according to the legal minimum...I'm not worried about my state pension and stuff right now), or will they want more?

Lastly, I was wondering how to go about claiming for my internet useage as part of my expenses. I use the internet a lot for my self-employment (email, research, running my website, etc.), but I do of course use it for personal use as well. I'd say about 25% of my time online is strictly for business purposes. Is it "the done thing" to claim for things like internet useage; even as just a percentage of my monthly bill; or should I forget about it??

There are student loan implications as well, but as things stand at the moment, I don't think I'll hit the £15,000 threshold anytime soon

Any help is much appreciated.

By the way, I'm Emily. Love this site! I've been reading it for about a month now, and it's great.

System

Since you are using all your tax free personal allowance (£6475) up at your part-time PAYE employment then you become liable to tax at the rate of 20% on your PROFIT.

This would be (£376 - £39.96) @ 20% = £67.20

and if you think you will be making significantly more you have to remember your class 2 and class 4 national insurance contributions - http://www.hmrc.gov.uk/rates/nic.htm

emilyteach1

Pam17 wrote: »

Since you are using all your tax free personal allowance (£6475) up at your part-time PAYE employment then you become liable to tax at the rate of 20% on your PROFIT.

This would be (£376 - £39.96) @ 20% = £67.20

Aha, thanks Pam. I was calculating the 20%, and then removing my expenses oops!

My expenses were £35.84. The £39.96 figure is my mis-calculated tax bill

I reach £68 as the correct figure now.

CLAPTON

you need to inform the HMRC of your self employed status within 3 months of starting

as pam says you pay 20% of the PROFIT

plus you are liable to NI
class 2 is £2.40 per week payable by DD monthly
and class 4 is 8% of profit
but you can claim small earnings exemption if your earnings are less than 5075 per annum


you will need to fill in a self assessment form (or online) after april 2011 and actually pay the amount due by end January 2012

emilyteach1

CLAPTON wrote: »

you need to inform the HMRC of your self employed status within 3 months of starting

I did that pretty early on, and I received a letter on Friday informing me I owed over £30 in NI contribs - I need to ring them on Monday and talk about the small earnings exemption you mention, I was only vaguely aware of that exemption, so thank you

As for self-assessment, will they write to me closer to the time to remind me?

I'm not very organised, as you can tell

tyllwyd

If you only started the self-employment in this financial year, HMRC should write to you in April 2011 to tell you to fill in a self-assessment tax form. If you are going to do it online, you have until end of January 2012 to complete it and pay any tax due - which will be the full amount of tax for 2010-2011 plus (if your tax bill is more than £500) half as much again as the first payment on account for the next tax year.

Since you are employed, you will also need to fill in the employment pages to tell them how much you've earned and how much tax you've already paid, so be sure to keep your P60 & wage slips. And keep track of any interest paid on savings accounts, they will want that info too.

You can claim your expenses for running an office at home, including some internet, but it does have to be reasonable - you haven't earned very much, so I don't suppose you have actually spent all that much time working. Have a look here
http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm



If you are going to do your tax return online, the best advice is to get signed up for it well in advance, to make sure you get your PIN and you can log in, and don't wait until the last minute to do your tax return because it gets very busy towards the end of January and there is very little time to get any problems sorted out.



(Sorry, just realised that I've repeated what Clapton said, but there is a bit more detail here so I'll post it anyway.)