Currently employed, but would like to do freelance work. A few questions need answers

mickym

Hi all,

Just wondering i I could get some advice. I have tried to research this a few times but always get put off as there seems to be a mess of information (some out of date too), so difficult to find the answers I need.

I am employed, but looking to do some extra work as a freelancer to try and bring in a bit more cash.

I need to find out the following:

1. Do I need to register as a business?

2. What do I need to do about VAT? Ive looked into it, but cant see any simplified guide on what I need to do.

3. Do I need to tell my employer? If I dont, can he find out? i.e. will my tax code change etc?

4. I work from home, but do not get any tax benefits from doing so as I am employed. If i were to do freelancing, would I be able to claim anything for heating, electricity, carpets etc?


Would really appreciate any help you may have to offer!

Thanks

steve1980

1: You don't register as a business, YOU register as self employed with HMRC - online form.

2: Unless you earn over £76,000 (around that figure) then you do not need to register for VAT. Remember, you claim VAT, you charge VAT.

3: Check out your contract. Every year you will fill in a tax return which is all done online with the HMRC.

4: You can, but it would only be a percentage and you would have to work out how much electricity YOU personally used for the business.

mickym

steve1980 wrote: »

2: Unless you earn over £76,000 (around that figure) then you do not need to register for VAT. Remember, you claim VAT, you charge VAT.

So basically if I invoice a customer, I price it ex VAT, then I dont have to deal with managing any VAT related paper work?

Any benefit of invoicing customers plus VAT? or do I only ever need to charge vat to your regular consumer (non business to business payment)?

Chances are, I will be doing work for

I would be happy with just earning a few extra grand a year, so no where expect to get upto £76k!

paddyrg

If you invoice, don't even *mention* VAT, unless you are registered for VAT (which is an active process, you will know if you have or haven't)

If you did ever register then you would have to add VAT to your invoices, but you would also be able to claim back any VAT you paid (eg for supplies). For many businesses there is no benefit to VAT registration, but for others the benefits are compelling.

mickym

Nice one. Thanks

Any other help would be appreciated

Savvy_Sue

mickym wrote: »

3. Do I need to tell my employer? If I dont, can he find out? i.e. will my tax code change etc?

To add to what steve said, check your contract. Some employers require you to tell them about any additional work you're doing, but won't object unless there's going to be a conflict of interest. Is there going to be a conflict of interest?

Generally I'd advise mentioning it anyway, because although your employer won't find out via the tax man, there are all sorts of other ways they might find out - casual chat over the water cooler, seeing you 'at work' out of hours etc etc etc.

And yes, you'll fill out a tax return each year, so you need to put aside at least 25% of your self employed earnings for that tax bill.

Browse the HMRC and Businesslink websites for more information and guidance. One thing worth mentioning is that if your self-employed earnings are less than £5-6000 per year (out of touch with the current figures), you can ask HMRC for a Certificate of Exemption on the NI contributions you'd otherwise have to pay - one of the first things HMRC will do if you don't ask for one is send you a Direct Debit form! It's worth doing that, because you get no benefit from self-employed NI conts if you are already paying them through a PAYE job.

BTW, HMRC are usually very friendly and helpful if you phone them.

paddyrg

BTW, HMRC are usually very friendly and helpful if you phone them.

...and you manage to get through ;-)

martindow

If you are going to be freelancing with companies who are VAT registered it would be worth registering yourself voluntarily. It will make no difference to them if you charge 100 pounds or 100 pounds plus VAT, but you will be able to get back the VAT element of your expenses.

If you are dealing the public or very small businesses who are not registered VAT would just make you less competitive.

Debt_Robot

Have you thought about how you are going to find clients?

mizzbiz

martindow wrote: »

If you are going to be freelancing with companies who are VAT registered it would be worth registering yourself voluntarily. It will make no difference to them if you charge 100 pounds or 100 pounds plus VAT, but you will be able to get back the VAT element of your expenses.

If you are dealing the public or very small businesses who are not registered VAT would just make you less competitive.

But if he's freelancing, his expenses to claim back VAT will be next to nothing but then he would have to charge VAT separately and thence look less competitive.

If you're doing normal freelance work and not looking to bring in a lot from it, avoid the VAT man altogether. Charge by the hour, pay VAT on your supplies as you would a consumer. Don't mention it on your invoices, for example.

See, if you go into VAT registration, say you charge £10 per hour to make it worth while. You will be selling more than you will be buying, hopefully, so to make £100 for ten hours work non-vat registered, you charge £100. To make £100 for ten hours work if you VAT register, you will have to charge £120, then administer this extra £20 through the quarterly return system (basically, it's you working for the VAT man for free to bring him in extra moolah).

If you're going self employed buying and selling stuff, then it's a different matter altogether. If you're doing drawings and selling them to people from your home PC - AVOID THE VAT MAN!

martindow

mizzbiz wrote: »

But if he's freelancing, his expenses to claim back VAT will be next to nothing but then he would have to charge VAT separately and thence look less competitive.

If you're doing normal freelance work and not looking to bring in a lot from it, avoid the VAT man altogether. Charge by the hour, pay VAT on your supplies as you would a consumer. Don't mention it on your invoices, for example.

See, if you go into VAT registration, say you charge £10 per hour to make it worth while. You will be selling more than you will be buying, hopefully, so to make £100 for ten hours work non-vat registered, you charge £100. To make £100 for ten hours work if you VAT register, you will have to charge £120, then administer this extra £20 through the quarterly return system (basically, it's you working for the VAT man for free to bring him in extra moolah).

If you're going self employed buying and selling stuff, then it's a different matter altogether. If you're doing drawings and selling them to people from your home PC - AVOID THE VAT MAN!

Doesn't it depend on who you are dealing with? If customers are individuals or small businesses operating below the VAT threshold then I agree.

If the OP will be dealing with large companies then they will not worry whether there is VAT or not - someone invoicing 100 +VAT and another invoicing 100 pounds with no VAT are the same to them. If the OP voluntarily registers they can then claim the VAT element of their business costs.