Freelance Tax Returns - Do I need to declare

Notmyrealname

Commandante wrote: »

Thanks all. I didn't realise it needs to be done next year, so thats useful.

Nor did I realise I need to register myself as self-employed, given that i'm also in full-time employment. And yes, I talked it through with my main employers and they're happy as long as theres no conflicts.

A win all round then. Don't forget to claim the expenses involved in the freelance work, even down to a stamp, the envelope and the paper the letter is written on.

jobbingmusician

When you let HMRC know about your self employed status, ask them to issue a UTR (unique tax reference), password, and anything else you will need for online filing. Keep these somewhere safe (I email them to myself and keep them in a special email folder). Congratulations! You have now avoided discovering, a week before your tax return is due, that getting these takes at least a week!

tyllwyd

You haven't mentioned what tax band you are in for your full-time job - remember that this self-employed work is taxed as being in addition to your salary from your employment, so I expect it will be taxed at at least 20%, which is a fair chunk of money out of £5K, so don't forget to allow for that.

Commandante

Thats precisely what annoyed me, i'm in the 40% tax band, so declaring it takes half the income away...which makes you wonder why you bother!!!

InsideInsurance

Be thankful therefore that your not in the 50% band and losing over half the income

Notmyrealname

Commandante wrote: »

Thats precisely what annoyed me, i'm in the 40% tax band, so declaring it takes half the income away...which makes you wonder why you bother!!!

No it doesn't. Don't forget you can apply expenses. Travelling to see clients at 45p per mile, phone, percentage of your household bills if you use a room solely for the business or £150 a year if its shared use etc.

Commandante

I've had a friend suggest to me that I should set myself up at a Limited Company...that way only paying corporation tax ... is this a better option?

KiKi

Commandante wrote: »

I've had a friend suggest to me that I should set myself up at a Limited Company...that way only paying corporation tax ... is this a better option?

Possibly...was this a one off?

You'd pay corporation tax of 20% (I think? Around that...) on your taxable income, then you'd have to effectively employ yourself, pay yourself min wage, then take dividends which are untaxed under a certain threshold. You'd have to file company accounts with Companies House and whilst you don't have to, you'd usually get an accountant to do this for you.

If you were going to earn a lot, then yes. For small time self-employment, you'd need to weigh up whether doing all this for £5k is worth it. It would cut your 40% bill, though - but you may be able to do that through expenses, depending on what your expenses were during the time you did this piece of work.

I'm sure someone with more experience of ltd companies will be along to help.

KiKi

Commandante

Thanks. Even on £5k it would save me about a grand in tax wouldn't it?

I'm hoping its not going to be a one off. The £5k is guaranteed but its looking like we'll win an additional contract which may bring me about a grand a month, in addition to that from my full time job. I suppose having a company in existence also opens the door to me doing more of this sort of thing too.

KiKi

Commandante wrote: »

Thanks. Even on £5k it would save me about a grand in tax wouldn't it?

Yes. It's whether or not the costs of an accountant and the hassle of setting up would outweigh this for you. (Not that it's a huge hassle at all, but some people wouldn't want to have to do the accounts or set up a company as a one off.)

I'm hoping its not going to be a one off. The £5k is guaranteed but its looking like we'll win an additional contract which may bring me about a grand a month, in addition to that from my full time job. I suppose having a company in existence also opens the door to me doing more of this sort of thing too.

If you're going to do this on an ongoing basis then you really do want to be looking at a ltd company set up, yes.

Good luck with it all.
KiKi