NI Exemption when self employed, advice please

mickym

Hi,

I currently work full time and am employed, but I am doing some freelance work, and just registered myself using the CWF1 form from HMRC.

I have read in places that I may be eligible for National Insurance exemption as I doubt i will be earning over the £5300 threshold, and also I am already paying National Insurance through my employer.

Can someone confirm if this is correct?

Also what happens if for some reason I do earn over £5300 threshold? What happens then? Do they back date it, if so how much am I liable to pay...just so I can be safe and put some aside to pay it if required?

Also they ask for my employers details and my salary (although its not a 'required' field). I dont really want my work knowing about my freelance work, not because of any conflict of interest (i will be only taking on small jobs they would turn away), i just would like to keep any freelance work / business private. Would giving the HMRC these details likely for them to contact my employers?

Thanks

InsideInsurance

The only possible way your employer can be contacted is simply to advise of a different tax code for you via PAYE and in no way can your employer know that this is due to your now being self employed.

Horace

You can apply to the HMRC for a Class 2 NI Exemption Certificate.

As you are both self employed and employed your tax code will change and the HMRC notify the employer of the change but they don't tell the employer that you are freelancing.

mickym

Right.

When I spoke to the HMRC over the phone the lady said that my work earnings are totally separate from my employers earnings...so I didn't think i would need to worry about earning over £35,000 (which would take me up a tax bracket/code) as a combined income from employment / self-employed projects.

Is she incorrect?

I really dont want them knowing about any extra earnings as I feel that this may jeopardise any improvement in salary as they will think 'I am earning enough'.

InsideInsurance

They will have no idea why the code has changed, could be a for a whole host of reasons. Unless it is a very small company you are working for the likelihood is that it will just be the Payroll department that receive the message and update the system and your line manager etc will be totally none the wiser

PlutoinCapricorn

Your PAYE Tax Code need not change: when you come to complete a self assessment, they ask you if you want to any pay tax owed via PAYE. If you say 'yes', then the code will change. If not, you will get the bill and ways to pay it. You will continue to get the personal allowance from your main job, and any freelance profit will be taxed at 20%.

Your employer will not know about your freelance work from HMRC, but is there anything in your contract of employment? Conflict of interest, being too tired and distracted to concentrate on the main job, using the facilities for your freelance work are possible issues. Also, if you advertise or go around in a van, someone might see and report you! These things have a way of coming out.

PlutoinCapricorn

I forgot to say that Class 2 NI is around £2.50 per week. The Direct Debit form and a form for claiming exemption arrive soon after you register.

As for asking about your employer when you register, this may be just to check that you are not doing "false self employment" i.e. changing from PAYE to self assessment for the same full time job.

mickym

Thank you for all your comments.

I called the HMRC again and they were very helpful.

Basically cleared up that like you said:

1) I can pay my yearly tax invoice by lump sum, or an adjusted tax code to pay it off through a higher rate of tax through my wages.

So no need to adjust Tax Code.

Even if it was done I dont have to tell employer about why it has changed.

2) I can earn upto approx £5300 without having to pay any more Class 2 NI. Although if I go over £7225 I will have to pay Class 4 contributions at a rate of 9% on total profit for the year.

(this sounds a bit silly to me as doesnt really encourage you to earn over £5300 as you will have to earn a decent chunk more than that to cover NI responsibilities).


Thanks Again

PlutoinCapricorn

You are not close to retirement age are you? That keeps changing too, but at whatever age it is, you stop paying Class 1/2/3/4 for ever even if you are still working (unless they change the rules of course).

mickym

no.... not near retirement age