Tax liabilities for freelance work

paulgilder75

Hi there,
I'm not currently in paid employment as I'm serving as a full-time dad.
As a trained journalist, I'm interested in finding a little freelance work through the Elance website to supplement our family income. Because of the nature of the work, it'll be fairly irregular. And I don't imagine I'll earn very much - maybe £50 here or there and not each and every week.
I have very little understanding of the tax system and the HMRC website doesn't make it a whole lot clearer. Is there a certain amount that I can earn in this way before I need to pay income tax and, if so, what is that limit? Assuming that I'm not going to reach that limit - and I doubt I ever will - do I actually need to tell anyone that I'm doing this small amount of work. Clearly I'll keep records of what I've done and what I've made, but I'd hate for it to backfire on me somewhere down the line because I've not understood the system well enough. Any help or advice would be greatly appreciated. Thanks all, Paul

Claytone

Try Googling PAYE tax calculator UK. You'll find that you won't be deducted any tax because of the amount of money you'll be making. If you're married, you will likely have to add your income to your partners. That said, you should definitely keep track of all your invoices and definitely file your taxes. Often you can claim expenses if you are working freelance. Try Freshbooks (google it) they're a great company for this type of stuff.

lijaloo

Paul, if you are based in the UK and you have any other income this will need to be taken into account when working out your income for the year. Any allowable expenses and the tax free allowance are deducted and tax would then be payable on the balance.

KiKi

Hi Paul

You can earn (as of tomorrow) £7,475 before you pay income tax, which is then 20% on all earnings over that.

If you register as self-employed with HMRC then you have to pay 20% income tax on everything over £7,475. You also need to pay NI contributions of £2.50 a week, and also 8% NI on the year's earnings, over a certain amount (currently £5,715). If your earnings are a very small amount, then you may be able to claim an exception from certain NI contributions, but I don't know how to go about that, sorry!

I am not sure if you have to register as self-employed if your earnings are going to be under the £7,475 - someone else can tell you that. But I think you do. I'd also recommend it, as then you keep up your NI contributions (£2.50 a week) which means you will still qualify for certain UK benefits if you need them. Also, you never know what might happen in the next year, and if you need to take on a full time job or more self-employment, you'll then have to backdate all this and tell HMRC all your previous earnings. Probably better to declare yourself as self-employed with HMRC now, then you're done with it.

Don't forget, that HMRC care about your TOTAL income for the year, regardless of whether it's PAYE or self-employed. So the £7,475 applies to your total income over the new financial year.

I hope that helps. If you call HMRC and tell them your situation, they will be able to advise whether or not you need to register, but as you don't actually know how much you'll be earning, they may well recommend that you do.

HTH
KiKi

KiKi

claypearn wrote: »

Try Googling PAYE tax calculator UK. You'll find that you won't be deducted any tax because of the amount of money you'll be making. If you're married, you will likely have to add your income to your partners. That said, you should definitely keep track of all your invoices and definitely file your taxes. Often you can claim expenses if you are working freelance. Try Freshbooks (google it) they're a great company for this type of stuff.

Hi Clay - FYI, you're not allowed your contact numbers in your signature, and Freshbooks is a primarily American website which does accountancy for businesses - the OP really won't need this for such small bits of work, although yes, he should keep invoices and receipts for expenses.

KiKi