Starting freelancing. Do I pay tax on small amounts?

RoderickP

Hey all,

I currently work full time and earn £43k. With four kids and a wife who doesn't work things can still be stretched, and so I'm looking at ways I can make some extra money. So last week I signed up to a website where freelancers can bid to work on jobs (I do web development) and get paid.

So I bid for a quick job, got selected, and earned $80 for 2 hours work after just being on the site for a few days. That looks good if I can keep it up :j

However, I'm thinking about tax. Do I need to declare every thing I make on this site? (I'm guessing the answer is yes) and does the government really take 40% from the measly $80 that I just made?! Really!? :mad: That's so annoying!

What if I only made £200 over the course of a year - do I still need to declare that, or is there a limit that I can make up to.

Anyhow, just after a bit of guidance here as I'm not up to speed on tax and things, and don't want to get myself in trouble!

Cheers,

RodP

kangadoo

My understanding (as a self-employed person, not a tax adviser, so I'm happy to be proved wrong!) is that it all counts, and if you're already using your tax-free allowance on your main wage there's no additional allowance so all additional income should be taxed.

You'll need to register as self-employed with HMRC as soon as possible (it's easy to do, just a phone call) and fill out a self-assessment form once a year.

http://www.hmrc.gov.uk/sa/index.htm

paddyrg

You pay tax on your income, whether £43000 or £43050. You will self-assess at the end of the year (online, takes around an hour) and pay what you owe (if anything) by debit card or transfer. You can offset reasonable costs wholly attributable to the extra business.

comeandgo

I suggest you talk to an accountant - a partnership with your non earning wife may be better option or Ltd company

RoderickP

OK - thanks for the advice everyone. I had a feeling I had to declare it and will sign up for self assessment.

One other quick question. Around 3 years back, I was a naughty boy! I wrote an iphone app and sold it on the Apple app store for about 2 years before I pulled it through low sales. I think I made around £300 in total, but this wasn't worth the cost of providing support, running the website, etc. So I cut my losses.

I never declared any of that ~£300 on any self assessment forms - maybe through ignorance and thinking that "it wasn't that much". I did have to fill in tax witholding forms and things at the Apple end, although I guess those have now expired.

When I start self assessing going forward, will Inland Revenue be able to see, and want me to pay, tax on that money I made back then?

Bad boy, Roderick!

Yup - I could see an accountant, but I have a feeling they'll start slapping fees on me, and with the combination of accountants fees and the government's 40% maybe its not worth the hassle of freelancing!

RodP.

paddyrg

Well, yes, probably you owe the money although it depends what Apple did with that witholding tax. That said, you may have got away with it (well, if you keep schtum for 6 years for safety). Depends if you want to be legit and declare previous earnings or 'forget' about previous things. If you're being legit, and your costs were so high and you have the receipts etc then the tax owed must be slim - you could try calling HMRC (I'd do so before the January rush) and asking them for advice on how to complete the forms.

At your work, is there any way you can go contract (on proper contract rates) and put everything through a limited close company? It may save you a little bit, or cost you more of course - depends so much on your circumstances (but that's where the accountant and tax advisor come in)

RoderickP

OK - thanks very much for the advice, it's appreciated!

Nope, no chance of going contract at work unfortunately. But its cool. I'll self assess, but wont mention my foray into app development and jus see what happens.

Wish me luck

RodP.