Self Employed and employed tax how to?

MWild_2

Hi all,

just after some advice on being employed and self employed at the same time.

ive found this on hrmc
hmrc . gov . uk /working/intro/employed-selfemployed.htm

but it confused me a bit really

I'm full time employed but do some consultancy on the side and have a retainer with a company for £500 a month

how does the tax work for me, do i have to do class 2 and class 4 or just one of those

i've heard i can avoid paying tax on my consultancy by registering as a business or something?

but the money has to be left in a business account?

an advice would be great

Thanks

heretolearn_2

Hi

Your consultancy earnings are self-employed earnings? Def. not being paid through the firm's paye scheme?

If so you need to register with the HMRC as self-employed and do a tax return once a year. You'll pay tax on the £6k income minus any expenses. As a self employed person you are a type of business already, called a 'sole trader'.

When you talk of 'registering as a business' do you mean a Ltd company. Don't do this for such a small income, you won't benefit from it.

There is no way to avoid paying tax on business profits - not even by leaving them in a bank account. If there's a profit you pay tax on it, whether you choose to spend or save that profit is of no account.

There are ways of minimising the tax through tax planning but again, not really at this level of income, other than to make sure you keep a record of all relevant expenses. Your tax works like this

income of £6000
business expenses of £1000
profit of £5000
you pay tax on £5000. If you are a basic rate tax payer in your main job and this £5000 doesn't take you into the next tax bracket, then the tax would be 20%, so £1000.