Paying tax on extra income when in full time employment

Moneyextra-Matt

Hello all,

Need some guidance on paying taxes as i'm a complete novice on this side of things.

I'm currently in full time employment, but have recently been offered some extra work for a friend. I work in Marketing and have done for a while now, so my friend has made me an offer to pay me £500 p/m for my time and effort + any costs that i'm required to pay in advertising spend etc. I'd love to get started on this, but before I do, I need to understand how I can declare my extra earnings to the tax man.

Having looked online, there seems to be a number of different options I could take, but nothing really makes much sense and i'm unsure where to even start.

I could really do with a kind member of this forum (who perhaps is in a similar position to me or with experience in this field) could provide me with some guidance in simple terms on how I should be approaching this.

Thanks
Matt

Dazed_and_confused

Is your friend employing you or are you running your own business?

Moneyextra-Matt

He won't be employing me. I'll just be running my own operations.

Dazed_and_confused

On the basis that you will do this for a while and not just one or two months (and could get other clients in the future etc) then it sounds like you should be registering as self employed with HMRC.

You sulouod have to complete a Self Assessment return by January 2020 and the first tax/NI/student loan bill would be payable in January 2020.

If it expanded income wise you might want to consult an accountant to see if self employed or limited company is best.

And that of course ignores the possibility that you should really be an employee.

Moneyextra-Matt

Dazed_and_confused wrote: »

On the basis that you will do this for a while and not just one or two months (and could get other clients in the future etc) then it sounds like you should be registering as self employed with HMRC.

You sulouod have to complete a Self Assessment return by January 2020 and the first tax/NI/student loan bill would be payable in January 2020.

If it expanded income wise you might want to consult an accountant to see if self employed or limited company is best.

And that of course ignores the possibility that you should really be an employee.

That's really helpful, thanks. Few questions....
1) Are there any particular steps I need to take first?
2) Do I essentially not have to pay any tax until Jan 20?
3) What am I expected to do between now and then?
4) Should I be placing my money into a banking account or am I ok to have it placed into my personal account?

Thanks

TheCyclingProgrammer

1. Nothing now. You need to register as self employed by 5 October 2019.
2. Essentially, that’s correct but if you earn enough you may need to make a payment on account too, based on 50% of what you earn in this tax year. Then another one in July 2020 and continuing the pattern of payments on account twice a year plus a balancing payment if you owe anything more in January.
3. Keep records of all income (your invoices) and any claimable expenses. Prepare for 150% tax bill in Jan 2020 and further payments in the future by making sure you always put aside your tax from your income as you earn it.
4. If you’re self employed you don’t need a separate account but you may find it cleaner to keep your business operations separate and your bank may not want you using a personal account for business transactions.