Employed and also being self employed..

bubble13

Hello

Apologies if anything like this has been asked before, I've had a search around and haven't found an answer for what I'm looking for.

I am in full-time employment and have recently joined 63336, where you are self employed.

My question is about tax - Would I have to register as self employed and send in a tax return each year? And if anyone else is doing something similar what do you do about saving the tax all year to repay?
I also have no idea about tax returns but I'm guessing the form would take me through that.. I'm just not sure how much to put away into savings until next April!

Thanks in advance for any advice.

Pennywise

bubble13 wrote: »

My question is about tax - Would I have to register as self employed and send in a tax return each year?

Yes, you need to register with HMRC as self employed as soon as you start. You'll have to start paying class 2 national insurance straight away and then will have to complete a self assessment tax return to declare all your income etc after the tax year ended 5/4/15. As to how much to save, it depends on your income. Assuming you're a basic rate taxpayer earning relatively average income, a rough guide would be to put aside a quarter of what you draw out of the business for your living costs etc. I.e. if you draw £800 per month, then you should put another £200 into a separate savings account - it won't be spot on but will be relatively near your eventual liability.

I'd suggest you go talk to a couple of accountants sooner rather than later as you need to know about book-keeping, what expenses are allowable, etc., and it's better knowing beforehand rather than having last minute panics and missed opportunities next year.

bubble13

Thank you, I'll definitely look into the book keeping part, if I start straight away I'm sure it'll make it easier for next April

purdyoaten

bubble13 wrote: »

Thank you, I'll definitely look into the book keeping part, if I start straight away I'm sure it'll make it easier for next April

If you have commenced after 6th April 2014 and 2014/15 is your first return, you will have no tax to pay on your self-employment income until January 2016. On that date you will have to settle the total amount due for 2014/15.

You will also have to pay 50% this amount again both in January 2016 (same date) and July 2016 as a payment on account for 2015/16 tax year unless either of the following is true:

a) The amount that you owe for 2014/15 is less than 20% of the total tax that you are due to pay in that year including at PAYE.

b) the amount is less than £1000.

Remember that you have to include ALL of your earnings on your self-assessment form.

Delphina

If you want to avoid paying 50% the amount again, (AKA payments on account), as per Purdyoaten's advice, you can ask HMRC to tax your self employment income through your tax code that your job is using.

For example, if your self emp income is £8000 PA, you can ask HMRC to include £8000 (or lower) as a deduction in your tax code. What you will pay is £8000 (or lower) multiplied by your highest rate of tax (such as 20% or 40%). But it means that you pay more tax on your employment and should have none or little to pay through SA. The rule says that if you already have paid 80% of your tax at (PAYE) source, you have no payments on account to pay through, so you need to roughly work out the total tax at your job first, too.

TheCyclingProgrammer

You need to declare your additional income and pay tax on it but whether or not you need to register as self-employed really depends if what you are doing constitutes trading. It might do, but you haven't given enough information to be certain.

If AQA works as I suspect it does, and you can just log on from time to time and answer questions and get paid for doing a set amount of work, then depending on how much you earn from this I'd be inclined to say it should just be declared as additional/freelance income on your self-assessment (which you'll need to register for). If we're talking a couple of grand a year, then I'd be inclined to take this route.

My wife does work for an online reviews company, vetting consumer reviews. She does this as and when she likes and isn't really under any obligation to do a certain number of hours etc. She logs on, and gets paid an hourly rate for the work she does each month, if any. She invoices for this work however I didn't really feel like it constituted a trade and after discussing with my accountant he agreed that she would be fine declaring the income (which was only about £1k a year) as additional income rather than registering as self-employed.

If what you are doing does constitute a trade as far as HMRC are concerned (you can see their badges of trade tests online) then yes, you'll need to register as self-employed and start paying class 2 NIC, although you can apply for a small exemptions certificate if its under the threshold (approx. £5k).

If you aren't sure, then you could register as self-employed to be on the safe side, although if your earnings were under the NIC small exemptions limit then as long as you're declaring the additional income and paying tax on it, I think HMRC would be hard pressed to apply any penalty as there would be no tax or NI owed.

EDIT: also wanted to say, if you want to just treat this as simply additional income rather than self-employed income and its not a lot, you might be able to avoid registering for self-assessment too by getting HMRC to collect the tax through your tax code, as pointed out above.