Setting up Freelance with a full time job

deefadog

Hi all, i work full time as a Graphic Designer and have been offered some freelance work which i will complete on the weekends and evenings. There could potentially be a lot of work some of which my wife can help out with.

The work will be completed from home and there is no outlay for this business as i have all the equipment (Which is covered under my normal house insurance).

What do i need to do to make this a legitimate company as i will be billing the company i will do the work for so i want it done correctly and dont want to be caught out. (or am i overthinking this??)

Any help much appreciated.

steve1980

You register with HMRC that you're a sole trader.

Nuclear_Themes

steve1980 wrote: »

You register with HMRC that you're a sole trader.

You also have three months before that's necessary so you're good to go immediately

steve1980

Nuclear_Themes wrote: »

You also have three months before that's necessary so you're good to go immediately

HMRC have done away with that, if you're going to be a ST then you have to register straight away.

Remember that are you register YOU, not the business.

You will also need a business bank account, not a personal one.

InsideInsurance

steve1980 wrote: »

You will also need a business bank account, not a personal one.

This is sensible, and will allow you to accept cheques in your trading name, but is not strictly necessary.

The other element for consideration is going to be any conflicts of interest with your day job. Does your contract of employment allow you to freelance? Is it worth risking your job over?

deefadog

Sorry for the late reply! (Never had email Notifications on)

Thanks for the replies

Good point, i have checked and freelance work will not conflict with my day job, so good to go on that.

I have many more questions (Sorry)



1) So is registering to be a sole trader the same thing as just being self employed bit with a full time job? (As someone i work with says he is just self employed and the tax office said it was no problem.)

2)Would what happens about National Insurance (Someone i spoke said something about 5k threshold)?

3) Would this extra income affect benefits? (As i my sub some work out to a friend who is working part time and receiving some benefits)

Thanks for any info - this is a mine field for me.

Horace

deefadog wrote: »

Sorry for the late reply! (Never had email Notifications on)

Thanks for the replies

Good point, i have checked and freelance work will not conflict with my day job, so good to go on that.

I have many more questions (Sorry)



1) So is registering to be a sole trader the same thing as just being self employed bit with a full time job? (As someone i work with says he is just self employed and the tax office said it was no problem.)

2)Would what happens about National Insurance (Someone i spoke said something about 5k threshold)?

3) Would this extra income affect benefits? (As i my sub some work out to a friend who is working part time and receiving some benefits)

Thanks for any info - this is a mine field for me.

You can be employed (full time job) and self employed at the same time. When you register with the HMRC you will be registered as a sole trader and you are then sent a self assessment form in April which you need to complete and include details from your P60 from your paid job too. You are taxed on your profits. You will need to pay Class 2 NI on your self employment, however, you may be able to get an exemption if you are on low income. Class 2 is about £2 a week. The HMRC offer free courses in completing your self assessment and they can advise what you can and can't offset against tax.

If you sub work out then you would be seen as an employer by the HMRC and your friend would be an employee - especially if this is a regular occurrence and then you would be subject to paying his tax and NI, you will also need employers liability insurance. For your self employment you will need insurance anyway - professional indemnity and if you have to visit someone's premises then you will need your own public liability insurance.

Businesslink.gov.uk - is still a good resource for people who are setting up as self employed.

deefadog

Thanks Horace.

Very useful information!

Actually on subing work out, i'd rather not do that, instead have the person do this as a freelancer direct from the company themselves. The person will be a retired family member and it will be extra income for them, so if they are set up as a sole trader would it have any impact on their pension (which is their only other income)?

InsideInsurance

Whether you want them as an employee or not and whether you set up contracts with them as an employee or not has little baring on if HMRC consider them an employee or not.

There has been a lot of cracking down, though not as much right now, by HMRC on people claiming to be self employed when the arrangement is for all other intents and purposes an employee/ employer one. If you look at the HMRC site you will find some of the tests they will use. If they decide that your family member is an employee you will be liable for the employers NI and all the other elements that having an employee attracts.

Being a sole trader and earning an income could impact their pension depending on the T&Cs of the pension and if it is means tested or not.

patman99

The good thing about registering, is that you only need to do it once in your lifetime. I registered 20 years ago, yet for the last 19 have done no self-employment yet HMRC still insist on me doing the online Tax return.

As for your relative and his pension. He will have a Tax allowance the same as everyone else. If his pension is above the limit then he will already be paying tax on that and any extra earnings will simply incur the normal tax charges. They will not deduct any money earnt from employment from his pension. I have worked with enough people who took retirement or had military/civil service pensions and then returned back to full time work.

I would be very careful about checking that your normal household insurance will still cover your equipment if you start using it for business purposes.

firstinflight

Some useful links:

Registering as self employed:
http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm:

Implications of being both employed and self employed (as you will be):
http://www.hmrc.gov.uk/working/intro/employed-selfemployed.htm

Guidance in determining whether people who do work for you are employees:
http://www.hmrc.gov.uk/employment-status/index.htm