employee and self employed

emmysmum

Not sure if this is the right place to post or not....
I'm going to b working three days a week, earning approx 22k pa. I'm planning to work from home, realistically earning or and another 10k pa.
My employer uses PAYE, so no worries in that front.
With the self employment, what do I do about my tax and ni? I read on here about keeping 25% back for tax etc, which I'm fine with, but how will I know exactly how much to pay?
Do I need to pay additional ni contributions?
I'll be using my home phone line, broadband, mobile phone and car occasionally for business. Can I claim any relief in those?
Ideally I'd also like to buy some new instruments, plus more possibly to rent out to students. Can I get any tax relief in this?
Or any point ers on where to get this info would be great!
Thanks

agrinnall

You'll need to register with HMRC as self employed and to do self assessment. Get a UTR number and you'll be able to do SA online, which will tell you how much tax you have to pay and when it is due.

http://www.hmrc.gov.uk/selfemployed/index.shtml

xylophone

http://www.hmrc.gov.uk/startingup/working-yourself.pdf

might have a few pointers?

adrihd

I'm doing the same, how it happens is you need to (do the above) and keep a traansparent set of books. The reason why I say this is because from time to time the HMRC will want to look at your books.

Are you a Sole Trader or a Limited Liability Company? In my case I'm LLC.

But I have to reiterate how important it is for you to keep books as HMRC friendly (transparent) as possible, as they can make you like a nightmare!

As a director of a LLC I pent the better part of 6 weeks chasing Homebase got a receipt as there was an inexplicable (in paperwork terms) £12!

adrihd

on top of that, I'm unsure why your 'employer' contractee, would be doing your PAYE *unless you have that agreement with them). Usually an accountant employed by yourself (or you yourself) would handle that?

Double confirm that this is being handled as PAYE infringements/ mistakes wind up nasty fines from HMRC!

John_Pierpoint

The initial posting is confusing, because it is not absolutely clear where self employment starts and employment ends.

Self employment involves paying "Class 2" and "Class 4" National Insurance tax.
The first is a small weekly payment and it builds up into an entitlement to basic state benefits - mainly state "old age" pension. Class 4 is a tax surcharge for most self employed (remember the state is not getting employer NI from the self employed).
If the basic benefits are covered by employee NI, and the self employment profits are small, it is possible to register as self employed and them opt out of Class 2 NI.

There are many threads on here discussing what the self employed can claim as expenses, to reduce their taxable profit. A major expense is usually the cost of travel from their place of business to their clients/tasks.

The really confusing sentence is this one:
Ideally I'd also like to buy some new instruments, plus more possibly to rent out to students. Can I get any tax relief in this?
Could this be a music teacher offering lessons at the teacher's home ? Not a brain surgeon offering to have a go on the client's kitchen table?

Ordinary revenue expenses (buying envelopes and stamps) can be charged as expenses against profits immediately. Equipment expected to last for years is capital equipment and is normally depreciated over several years, the depreciation being charged against profits; however, especially when the government is worried about the state of the economy, capital allowances allowing free depreciation (ie for tax purposes the purchase can be written off against taxable profit in year one) are introduced. These are meant to encourage/"force" self employed entrepreneurs to rush out and buy new equipment. Possibly not enough to build and equip a performing arts centre, but should cover a modest purchase of "instruments".

http://www.hmrc.gov.uk/capital-allowances/
http://www.hmrc.gov.uk/manuals/camanual/CA10040.htm

Of course you actually have to be making taxable profits to have tax to avoid - there are not a lot of grants on offer these days.

Should you be making good profits, it might make sense to incorporate (ie create a company that employs you) but I get the impression that only modest profits are expected and with good advice you could master self employment on a DIY basis.
Running a company would require you to purchase additional support.

emmysmum

Apologies if my initial posy was unclear. Basically I'm a full time secondary music teacher, and I'll be reducing my hours to three days a week (21 hours), and I'm planning to teach private lessons at home.
The PAYE part is through my work, so I mean on my salary from school I'll be paying tax, ni, student loan, pension etc.
I imagine I'd be a sole trader? Would plan to work 10-15 hours per week at home.
I'd teach woodwind and brass, so would like to buy some flutes and trumpets that pupils could rent for say a term, before they purchase their own.
If I don't buy any instruments, pretty much all the pupil fees would be profit, so I'd estimate my total income from my self employment would be around 10k, as I'd only do it during term time. Is this the sort of amount that would let me opt out of the NI contributions from self employment.
I went to a business gate way seminar about setting up, but it was all about choosing a name and description etc, which wasn't really any help to me.
I need to do some reading i think!

Savvy_Sue

emmysmum wrote: »

The PAYE part is through my work, so I mean on my salary from school I'll be paying tax, ni, student loan, pension etc.

Don't forget that as well as tax and ni on your s/e profit, you'll also have to pay an additional % towards your student loan.

emmysmum wrote: »

I imagine I'd be a sole trader? Would plan to work 10-15 hours per week at home.

sole trader sounds fine. I wouldn't have thought there were any huge liabilities with that. Although having said that, have you budgeted for insurance, and checked with your home insurers, and your mortgage provider if relevant or landlord if renting?

emmysmum wrote: »

I'd teach woodwind and brass, so would like to buy some flutes and trumpets that pupils could rent for say a term, before they purchase their own.

I'd make sure that was time limited, I'm sure you know what's normal, but you don't want all your instruments lent out long term when new beginners arrive.

emmysmum wrote: »

If I don't buy any instruments, pretty much all the pupil fees would be profit, so I'd estimate my total income from my self employment would be around 10k, as I'd only do it during term time. Is this the sort of amount that would let me opt out of the NI contributions from self employment.

Your liability to pay NI if you're s/e is based on your profit from s/e, you'd need to have expenses of about £4000 in that scenario to be eligible for a low earnings exemption. It might well be worth talking to a couple of accountants, even if you only use one for the first year, but if you've got capital expenses it's a bit more complicated than if you've got simple income and expenses.

John_Pierpoint

Here are a couple of threads that if nothing else will make you realise you are not alone.

https://forums.moneysavingexpert.com/discussion/4003435
https://forums.moneysavingexpert.com/discussion/4506939