Am I Self-Employed Or A Freelancer?

fablad75

Hope I'm posting this in the right place.

I've done a few one-off graphic design projects for a company, and have sent them a few invoices (at their request) for each of them.

Does anyone know if this make me self-employed? Or am I still considered a freelancer? Do I need to register my business with HM Revenue and Customs?

As an additional question, how am I meant to pay the taxes for these jobs?

If anyone can help me with this I would be most grateful! I don't want to get in trouble with the tax man!

lemontart

basically the same thing when it comes to taxes etc,

Beth
xx

whatatwit

Check with HMRC, you will get a self assessment form to complete.
If the work has been done from home, enquire about any allowances for use of home as an office, maybe a small percentage.

RibenaBerry_2

Yup. Same thing.

When you say register, do you mean for VAT? You only need to do that if you go over the VAT threshold (about £60k) or you want to.

LyndsM

Hi Fablad

I've been in the same boat. Any work you do outside of or on top of your regular formal employment (where your employer is paying your NI and tax etc) is technically 'self employed' work.
At this point it's probably easier all round for you to be classed - for the personal work you have been doing - as a 'Sole Trader', which means you don't need to register yourself officially as a Ltd company, or become VAT registered unless you're earning a bucket load (although some companies like to deal with VAT registered only, it just makes accounting easier. Apparently. In which case you can register voluntarily even if you're not making that much). However you do still need to declare any earnings to the IR so they can have their slice :rolleyes: .

Bear in mind that you will likely have used up your tax free allowance within your 'employed' role and so anything you earn within your 'self employed' role will get taxed, and if it takes you into a higher earnings bracket you'll be taxed at a higher rate for that slice of earnings.

Nowadays, as my OH is a contactor (IT) and I am moving towards more full-time freelance (and giving up the day job, hurray!) and so at this point it makes it easier and more financially beneficial for us to register ourselves as a Ltd company or a Partnership (we opted for Ltd in the end but there wasn't much between them). But if we were not both fully self employed/freelancing/contacting it wouldn't be worth it.

Have a look at the Business Link website and maybe go and have a chat with them, they have tons of free info and are really helpful. It's worth looking up on the Inland Revenue site too as the rules are always changing and it's better to be on top of any new requirements.. just in case!! Also the IR website will get you to the forms you need to declare your earnings.

On another note, I am also a graphic designer (print & corp. ID/branding mainly) so if you ever need an extra pair of hands let me know (how cheeky!!!) :rotfl:

Hope all this is helpful - there'll probably be loads of other self employed/partially self employed people on this board so I'd be interested in seeing what their replies are too, just in case I'm missing out on some fab money saving ideas for us floaty types!

Cheers
Lynds

fablad75

Oh wow, thanks for all the quick replies!

Thing is, these projects are small and irregular (I'm a trained designer but I don't really do it seriously!), so I don't know if it's worth registering as a sole trader. I don't even know what the implications are of being a registered sole trader and I don't want to get into something that might cause a lot of hassle for me in the future e.g. having to fill out tax returns every year even though the freelance work dried up ages ago!

I've never even filled out a self-assessment form in my life, as I've always been an employee.

Is it possible to get a self-assessment form for next April, and just declare it under 'other income' (I understand there's a box to tick for this!) and pay taxes on this extra income as a one off?

I won't be registering for VAT - I can barely understand what it all means!

I'll definitely go check out the websites.

And LyndsM, I'll keep you in mind if I should ever get so famous that I'm flooded with work (but don't hold your breath!)

LyndsM

Hi Again
Sorry, I should have said: as a Sole Trader you don't have to do anything in the way of registering yourself, it's just a phrase by which you would refer to yourself if you were asked for company info (which you won't have, not being registered!). This is why it's definately the easiest option!

Basically, if you do that, then you don't need to do anything other than tick that extra income box and give details or download a form and submit that (just to make sure the tax man is happy) no need to form a proper company or anything! And if you don't have any extra work the next year(s) then you won't need to do anything at all (Phew!)

Cheers
Lynds

protector

A few issues with some of the above comments. It isn't exactly important to your case, but there is a big difference between a partnership and a limited company.
A partnership is essentially 2 sole traders.
As limited company you are afforded certain protections, and if you are earning enough, you can structure your income to reduce your tax significantly in a way you simply can not do as a sole trader.
The unemployment benefits available between the two are different too.

A significant point is the need to register yourself as self employed. This is something you are required to do. Failure to do so within the first three months of being in business can (and to HMRC "can" usually means "will") lead to being fined. They call it a "penalty" but to the real world it is a fine.


Not far off being semantics here - but there is a difference.
You don't register yourself as a limited company. You set up a limited company of which you are a director and/or an employee.
You register yourself as a sole trader.


https://www.hmrc.gov.uk will have a lot of the information you need.
On the front page there are links to their sections on self assessment, self employment, VAT, starting a limited company and much more.

LyndsM

Hi Protector

Thanks for that, yes my partner and I have set ourselves up as a Limited company - going through all the required legal and tax related processes with the help of a paid-for professional service - so we are quite content that we're on the right side of the laws with that and we have all the documentation and are listed at companies house. We decided not to go the partnership route as it was not the best way for us personally, but I do know people whose situations are really quite similar to ours but the subtlest of differences has made it better for them to be a partnership. One thing I am sure of - it's all very confusing!

Regards the sole trader aspect - I had not needed to officially register as self employed previously, but it's definitely always worth checking as rules do change and things may be different now to when I was classed as a sole trader.
As I was also working for other people on an employed basis I was advised by Business Link to refer to any outside self-employed work as work done as a sole trader. Maybe it was to get round being half employed/half self employed? Maybe they gave me the wrong information!:eek: I'm not sure, but I've never had any comeback from the IR or anywhere else so I'm not going to worry.
I think the OP though should probably check just to make sure because I'd hate to be blithley giving out what I thought was good info only to find out I'd been given the wrong story myself.

Thanks again
Lynds

Gilchro1

Fablad,

I'm afraid it's you who is liable for the tax on the work (or your company, however you set up)
I deal with many self employed people in my work and we always stress to those who want to go down that road that the best thing to do is to self tax by skimming 25% off each job to a separate savings account that you can then use at the end of the tax year to pay off any tax liability you have.

If there's any left over, ppppaaaaarrrtttttyyyyyyyy

protector

Gilchro1 - good advice about the seperate account for tax. Not only is there less risk of accidentally blowing it, but it is sitting in an account instead of in the tax-man's pocket - so you get the intrest instead of him.

LyndsM - I'm not going to go into detail on it - but as a limited you can structure you income in different ways, and it is possible (and legal) to save several thousand a year in tax payments.
Dividends attract a lower tax rate than earnings.

If you have a good accountant they should be able to sort that kind of thing for you (if they haven't already)
I know someone who was told by the IR that this way of working was, and I quote "morally wrong" (that coming from the revenue - institutional theft ) - needless to say he just laughed and left it at that. They don't like it, because you're paying less - but it's all above board.

Oh - and the 3 month thing - I got that off the HMRC website earleir today - it is on;y mentioned in one of their leaflets, and the information is suitably confusing on some issues - they seem to like it vague so they can bump as many people as possible to a higher taxation. I had been told already that you had to declare yourself as self employed. Obviously with a limited company you're not self employed, but an employee/director of the company. One really good thing about being limited over a sole trader though, is if for some reason things go very wrong and there's a legal action brought - it will be brought against the company, and not you. Obviously some people abuse that, but for a genuine business it can sometimes be a valuable protection for your personal property.