Gone freelance halfway through tax year

CraggyRockFace

Hello,

I got my P45 from my previous PAYE job that I'd had for a few years on the 31st Dec 2013.

I started a few days of freelance work on 6th Jan 2014, and I've just registered as self employed on the HMRC website.

I don't expect my freelance work to amount to much, perhaps a few thousand over a whole year. So for the remainder of this tax year up until 6th April, I expect that I will be due a tax refund due to me earning much less in these last 3 months compared to the 9 months I was in PAYE earning 30K+ pa. Will this all be worked out later on, when do my self assessment for the time I have been freelance in the tax year 2013-14?

Also I am looking at my class 2 NI contributions. I notice that if your freelance earning are below £5,725 per year you do not need to pay - and in a full freelance year I think that this might apply to me. However, as I have earned way over this threshold from my PAYE job for the first 9 month of the '13-'14 tax year, do I need to pay the class 2 contributions of £2.70 per week for the remainder of the tax year?

So that leads me to ask also about class 4 contributions? Obviously these wont be worked out until the tax year is over an I do my self assessment, but will my earnings from my PAYE job be taken into account when looking at my overall income for the tax year?

I think logically that since the point of PAYE is that all the tax an NI is paid directly, then my earnings during these 9 months should not be taken into account, as I've already paid the NI on what I've earned during this time.

But I'm not sure - can anyone help?

Thanks.

CLAPTON

CraggyRockFace wrote: »

Hello,

I got my P45 from my previous PAYE job that I'd had for a few years on the 31st Dec 2013.

I started a few days of freelance work on 6th Jan 2014, and I've just registered as self employed on the HMRC website.

I don't expect my freelance work to amount to much, perhaps a few thousand over a whole year. So for the remainder of this tax year up until 6th April, I expect that I will be due a tax refund due to me earning much less in these last 3 months compared to the 9 months I was in PAYE earning 30K+ pa. Will this all be worked out later on, when do my self assessment for the time I have been freelance in the tax year 2013-14?

Also I am looking at my class 2 NI contributions. I notice that if your freelance earning are below £5,725 per year you do not need to pay - and in a full freelance year I think that this might apply to me. However, as I have earned way over this threshold from my PAYE job for the first 9 month of the '13-'14 tax year, do I need to pay the class 2 contributions of £2.70 per week for the remainder of the tax year?

So that leads me to ask also about class 4 contributions? Obviously these wont be worked out until the tax year is over an I do my self assessment, but will my earnings from my PAYE job be taken into account when looking at my overall income for the tax year?

I think logically that since the point of PAYE is that all the tax an NI is paid directly, then my earnings during these 9 months should not be taken into account, as I've already paid the NI on what I've earned during this time.

But I'm not sure - can anyone help?

Thanks.

you need to apply for class 2 NI exemption - these are based on your SE earnings only and don't take into account your PAYE earning




you class 4 earning will be based on your SE earning only too

agrinnall

Yes, you'll get a refund if one is due once you submit your 2013-4 tax return. If you are expecting a refund then it's in your interests to do it as soon as you have all of the necessary information, I usually try to get mine submitted in late April or early May. If you haven't done SA before then get your request for a UTR in before April so that you don't have to wait to get started.

jimmo

You can claim a cessation repayment (Cessation of PAYE) now using form P50.
http://www.hmrc.gov.uk/pdfs/p50.pdf
Where the form refers to work read that as paid employment.
This is a staff instruction that seems to make it clearer.
http://www.hmrc.gov.uk/manuals/pommanual/PAYE94025.htm
The thing to remember then is that the cessation repayment will use up all your allowances for 2013/14 so that you will then have to pay tax on all profits your self-employment generates for the current year. That tax will be due by 31 Jan 2015.

CraggyRockFace

Great, thanks for all the info.

Never heard of the cessation repayment before, but sounds like a great way to keep a bit more money in my account for a bit rather than HMRCs account!

CraggyRockFace

jimmo wrote: »

Where the form refers to work read that as paid employment.

So "paid employment" is totally different to self employed freelance work? Because the declaration on the form says:

Please tick at least one of the following boxes:
• I am actively seeking employment and have been unemployed for four weeks or more and have not claimed any of the taxable benefits listed on page one.
• I have retired from work and do not get a pension from my old employer
• I have returned to full !time study
• I do not expect to go back to work (including part time or casual employment) before the start of the new tax year on 6 April The information I have given in this claim is correct and complete to the best of my knowledge and belief.

And on first glance it seems like it would not be truthful tick the bottom box - but you're saying "work" in this context does not mean any self employed work? I've already done a week's work as a self employed freelancer so I don't want to get it wrong.

Thanks.

jimmo

CraggyRockFace wrote: »

And on first glance it seems like it would not be truthful tick the bottom box - but you're saying "work" in this context does not mean any self employed work? I've already done a week's work as a self employed freelancer so I don't want to get it wrong.

Thanks.

Did you read the second link I gave you?
The second bullet point says
On final cessation of employment for the year where the customer is starting self employment (see ‘Cessation repayments: SA cases’ below)
To me that is perfectly clear and there is nothing I can add.
　

CraggyRockFace

Sorry, you are right, I did read the second link and yes it is perfectly clear.

It's just that the Form itself is not perfectly clear, and I guess I'm surprised that you have to read the (not exactly easy to digest) staff instructions in order to find out the full details. Its almost like they don't want me to have the money back...