Second income(s) - newbie advice please

Arfa__

I've been working full time for the same employer for the last ten years, tax has always been pretty straight forward and needed little intevention on my part. For several years I went into the 40% bracket, but this year dropped out, due to bonuses drying up.

In the past I've claimed back tax relief on my pension contributions, due to my company only giving relief for first 20%.

Recently I've undertaking some freelance work on the side and have starting some websites that have been earning a little cash via affiliate schemes. The former has earnt me a few grand, the latter just a couple of hundred.

Obviously I need to pay tax on this extra income. How do I go about this, I'm a complete newbie and am a little daunted by everything on hmrc.gov.uk.

Am I best just declaring it as a second income and paying tax as an individual? Or should I be going the full hog and presenting myself as a business? With the latter, I presume I can offset all my website costs, yes?

I've had a generic "Most employees pay the right amount of tax. Do you?" letter, but also a letter saying there's been an error in my tax code, and that I owe £87...prior to earning any of this extra income. Hmmm.

getmore4less

You will need to go down the self employed route fo your consulting and web businesses.

00ec25

there would be no point in you setting up as a company at this early stage, therefore you must register as self employed. It is quite normal to have both employee (PAYE) and (one or more) self empolyed incomes at the same time, all it means is you need to complete extra pages on the tax return

now the bad news - you MUST register as self employed with HMRC within 3 months of starting the work - otherwise you get a penalty

start here on HMRC website
http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

CLAPTON

Arfa__ wrote: »

I've been working full time for the same employer for the last ten years, tax has always been pretty straight forward and needed little intevention on my part. For several years I went into the 40% bracket, but this year dropped out, due to bonuses drying up.

In the past I've claimed back tax relief on my pension contributions, due to my company only giving relief for first 20%.

Recently I've undertaking some freelance work on the side and have starting some websites that have been earning a little cash via affiliate schemes. The former has earnt me a few grand, the latter just a couple of hundred.

Obviously I need to pay tax on this extra income. How do I go about this, I'm a complete newbie and am a little daunted by everything on hmrc.gov.uk.

Am I best just declaring it as a second income and paying tax as an individual? Or should I be going the full hog and presenting myself as a business? With the latter, I presume I can offset all my website costs, yes?

I've had a generic "Most employees pay the right amount of tax. Do you?" letter, but also a letter saying there's been an error in my tax code, and that I owe £87...prior to earning any of this extra income. Hmmm.

as a self employed person you can offset all your allowable expenses against your turnover
so yes you can offset your website costs; what other costs do you incur?

Arfa__

Cool, that clears things up. Right, better register as self employed prompto! Is the 3 month rule, from when you started the work, started earning, started paying for outgoings, etc? The websites started off as personal blogs, pet programming projects some time back, then only recently did I start monetising them.

Costs I was thinking of offsetting: domain names reg, hosting, web advertising, google custom search engine fees. Could I also offset computer hardware (e.g. laptop), software? If my website features a review of an item, and I had to buy the item, can that too be offset?

PlutoinCapricorn

First things first:

you do need to register with HMRC as a sole trader. The start date is when you first started real work with the intention of making money, as opposed to just playing around for your own benefit.

You will need to decide whether to trade under your own name - the simplest option - or whether to chose a "trading as" name. If the latter, you will need a new bank account as the name will stop payments . Many part time freelancers with only a small number of transactions do use their own personal account and operate under the radar of their bank. There is also the question of whether to use a business address or your own residential address.

You may need to think about insurance too.

Have a look at https://www.businesslink.gov.uk.

Once you have registered, you will need to complete a self-assessment tax return each year. If your business year is the same as the tax year, your first will be a short year up to April 5th 2012. The deadline will be January 2013, which gives you plenty of time to learn how to complete the return. Make a note of all expenses and running costs incurred in setting up and running your business.