Is working extra hours worth it?

hertsandsoul

I currently work from home 9-5, 5 days per week.

I have been offered some freelance work to do outside of my working hours - £10 p/h for 6hrs per week.

I could do with the extra cash, but not sure whether it would be worth it.

Does anyone know how I would go about working out how much I'd get taxed on these extra hours?

Thanks

lincroft1710

If you are a basic rate taxpayer and have used your tax allowance in your main job you would pay tax at the standard rate of 20%. So the extra £60 pw gross would give a net of £48.

scaredofdebt

Only you can really work out if it's worth it or not as it's not just down to simple economics, ie would it impact time spent with family etc?

Could you negotiate a higher rate?

hertsandsoul

Lincroft1710 - thanks that's really useful. Would there also be a student loan amount taken out from this? I currently pay an amount from my salary each month.

hertsandsoul

scaredofdebt - I was mainly talking about financially, whether it would work out a decent hourly rate with the tax amount deducted. I am hoping to be able to do just over 1hr per day before I start my full-time job, so aside from losing an hours sleep, I'm hoping it won't impact my life too much.

I could probably go back and ask for more. It's the first time I've done freelance, so I didn't really have a clue what the going rate would be.

jamesmorgan

Possible deductions on £60 likely to be

Income Tax (20%) - £12
National Insurance (12%) -£7.20
Tax credit withdrawal (41%) - £24.60
Student Loan (9%) - £5.40

NI obviously depends on whether you do the work on an employed or self-employed basis. If self-employed, you might need to factor in some costs for setting yourself up as self-employed.

Tax credit withdrawal is obviously dependent on whether you are receiving tax credits. If you are receiving other benefits (eg housing benefit) then the calculations get more complex.

Ignoring other benefits, worst case scenario is that you lose £49.20 from your £60.

hertsandsoul

jamesmorgan - I don't receive any benefits and my current salary falls below the taxable rate of £10,000 for the most part of the year. Would my additional income be taxed separately to my salary or is it all lumped together and then tax based on that amount?

Sorry for all the questions, I can't seem to find much information out there.

jamesmorgan

hertsandsoul wrote: »

jamesmorgan - I don't receive any benefits and my current salary falls below the taxable rate of £10,000 for the most part of the year. Would my additional income be taxed separately to my salary or is it all lumped together and then tax based on that amount?

Sorry for all the questions, I can't seem to find much information out there.

If you are an employee, your employer(s) is/are responsible for ensuring that tax and NI are paid at appropriate levels through PAYE. If you have multiple concurrent employers this process can be a little complex and sometimes you may pay too much/too little tax throughout the year, but this should sort itself out at the end of the tax year, although there is a slight difference between tax and NI. Tax is worked out on an annual basis (with payments spread evenly across each month). NI is calculated on a weekly or monthly basis (depending on how frequently you get paid). If you pay it one month, you cannot claim the excess back if you earn less the following month.

Things get a little more complex if you have a mix of employed and self-employed work. With self-employed work, you are responsible for paying your own tax and NI. Tax will broadly be based on your total income minus the tax you have already paid. NI for self-employed work is a mix of class 2 and class 4 contributions (http://www.hmrc.gov.uk/working/intro/selfemployed.htm).

As an example, lets assume personal allowance is £10,000 and you earn £11,000 from employment in a tax year and paid £200 tax (ie the correct amount) If you then earn £1000 from self employed freelance work you would need to pay an extra £200 tax. This is normally done through filling out a self-assessment tax form.

However, that said if the freelance work is on a self-employed basis, you may wish to seek advice on the best way of doing this as there are lots of different ways of setting yourself up as self-employed. These will come with different ways of minimising your tax/NI liabilities. As a minimum you would be able to subtract any expenses from your income before calculating your taxable income. The following link may be a useful starter, but you may wish to seek professional advice. (http://www.adviceguide.org.uk/england/work_e/work_self-employed_or_looking_for_work_e/self-employment_checklist.htm#h_income_tax)

jamesmorgan

hertsandsoul wrote: »

jamesmorgan - I don't receive any benefits and my current salary falls below the taxable rate of £10,000 for the most part of the year. Would my additional income be taxed separately to my salary or is it all lumped together and then tax based on that amount?

Sorry for all the questions, I can't seem to find much information out there.

Further to my previous answer, if you are doing the work on a self-employed basis you would also be responsible for notifying student finance and making student loan repayments as appropriate on the extra money.

If your salary is below £10K are you sure that you not eligible for working tax credits? (you may not be if you are under 25).

Mistral001

If the freelance work is different from the type of work you do in your day-job then it could be another string to your bow to so to speak and it might develop into a new career. So money might not be just the only factor in deciding.


If the freelance work is just more of what you do in your day job then money will be the only consideration I should have thought as the freelance work would have no advantages as far as your career is concerned in my view. Frankly, you are not getting paid near enough in my view. Your employer would probably be charging your work out at between 2.5 and 3 times your pay rate to cover overheads and make a bit of profit. So even if you are getting minimum wage now you would probably need to be charging at £15 to £20 per hour.

FinanciallyUnsavvy

As far as I'm aware (now don't take this as gospel as I've just started a small self-employed project on the side of my full time work, so I'm just trying to get my head around tax etc. myself)...

You won't have to pay any student loan if you're not earning over 15,000 in a year - and by the sounds of things you won't be (providing you're not on the "old style" loan system, which I know nothing about!)

You'll pay 20% tax on anything you earn over £10,000 over both jobs. So set a savings account/jar/whatever aside to put in 20% of your earnings from your freelance work.

I'm not sure about national insurance. I've heard conflicting things. If you are paying it from your main job you may not have to pay extra but I need confirmation of that myself.

All in all, I think it IS worth it for you - it's likely 80% of your earnings are yours to keep after tax.