Earning extra money when freelancing, when should I declare this?

-pete-_2

Hi everyone.

I have previously been employed as a full time website developer at a local agency, it was only a small company with a couple of employees.

At the start of August I left this company to work for a different, larger company doing website work in-house.

As the previous employer didn't have many staff I was asked to do some freelancing work during evenings, which - as I was moving into my first house - I accepted.

The work has come in dribs and drabs and doesn't add up to much (around £80 a month) but I've recently been told I can take on another of the clients directly which could pay up to an extra £320 a month.

Its starting to get to the stage where I think I'm going to have to declare this to the tax man and maybe register as self-employed? Is there anything else I need to do? Am I going to get hammered for tax for a while?

Any help would be appreciated!

KiKi

You always have to declare it to the taxman, doesn't matter whether it's £80 or £320.
* Register as Self Employed with HMRC (register as a sole trader for now, as it's such small amounts)
* Keep all copies of invoices and all receipts for expenses. Record them on a spreadsheet to make it easier.
* Complete a tax return after April 05th each year (so in April next year you fill out a form for the tax year 2016-17).
* The tax return is simply declaring your total earnings through employed work and self employed work, then any expenses associated with self employed work. It's very simple to do. Keep your invoices and expenses for 6 years just in case it's ever queried. As soon as you submit the form it will tell you what owe / any rebate.

As an aside, the easiest way of making sure you can pay it is by putting 30% of your SE earnings aside each month, assuming you're a 20% taxpayer.

No idea what you mean by hammered, but if you mean will you have to pay tax on it - yes, assuming you earn over the personal allowance. You pay tax based on the total of your year's earnings, so assuming you use all your personal allowance through PAYE in your employed role, you'll pay tax on the full amount of any SE earnings. So if you're in the 20% bracket, you'll pay 20% on those earnings, plus NI2 and NI4 contributions, unless you get a small earnings exemption which means you won't have to pay NI2.

Just another thought - you may want to check your employer allows you to do work elsewhere, if you didn't get permission when you moved to them. Many employers don't, hence mentioning it.

KiKi

-pete-_2

This is extremely helpful KiKi, thank you.
Also you have the same name as our cat!