Freelancing on top of PAYE.

MaxiRobriguez

Hello -

My partner is considering taking a freelance role as a 2nd job on top of her normal PAYE job. She earns £30k at the moment, and is likely to earn an additional £15k from the freelancing.

I'm assuming it's best for her to realise the income freelancing as a sole trader rather than start a 'company'? I'm in the higher earning bracket so there's not much room to assign her earnings to me via dividends/wages.

Probably quite a basic question but I've no experience of self-employed work.

Barney_Rubble_0403

https://www.sjdaccountancy.com/resources/limited-company/tax-benefits-self-employed-limited/

Attached is an interesting read. Most will start off as sole trader as the admin side is easier and less of a burden. Combine earnings from the P60 with self employed earnings from the relevant taxable year and pay balance owed by the due date.

Dazed_and_confused

She earns £30k at the moment, and is likely to earn an additional £15k from the freelancing.

It isn't clear if the £15k is expected turnover or profit but if it's the latter this could mean your partner ends up paying some higher rate tax herself. Depends where she is resident for tax purposes.

MaxiRobriguez

England based. The £15k is turnover but profit is likely to be very close to that figure as the only costs of the freelancing will be insurance and petrol.

Thanks for the link Barney.

MaxiRobriguez

Having thought about it for 5 minutes, is there anything to stop my partner taking the £15k as dividends, paying 7.5% on £13k after dividend allowance (and assuming she doesn't tip over £50k higher rate)....

.... and then get further tax relief on that money if she put it into a SIPP?

Dazed_and_confused

She has some headroom then before higher rate applies.

Scottish resident would have been paying some 41% tax.

Dazed_and_confused

There is no dividend "allowance". Unless covered by the Personal Allowance all dividends would be taxed. The first £2,000 would be taxed at the dividend nil rate (0%).

For most people the distinction between an allowance and a 0% tax rate doesn't change anything but for some it makes a huge difference. Probably doesn't alter anything for your partner.

Might be she's best getting professional advice if she's thinking of starting a limited company. Potentially more onerous/expensive reporting requirements.

00ec25

MaxiRobriguez wrote: »

Having thought about it for 5 minutes, is there anything to stop my partner taking the £15k as dividends, paying 7.5% on £13k after dividend allowance (and assuming she doesn't tip over £50k higher rate).

spend longer thinking and go see an accountant.

15k turnover is no where near enough to justify the extra costs and admin required to operate as a Ltd Company able to pay dividends

if all the money is destined for a SIPP then the company could simply pay it direct to the pension and avoid any personal tax whatsoever. Those sort of tax planning options are why it is worth paying for professional advice.

MaxiRobriguez

Fair.

Thanks all.

londoninvestor

MaxiRobriguez wrote: »

Having thought about it for 5 minutes, is there anything to stop my partner taking the £15k as dividends, paying 7.5% on £13k after dividend allowance (and assuming she doesn't tip over £50k higher rate)....

.... and then get further tax relief on that money if she put it into a SIPP?

Remember the rationale for lower tax on dividends compared to "normal" income is that a limited company has to pay 19% corporation tax on the profits that the dividends come from...