Declaring additional income

aroominyork

Alongside my main job (PAYE) I am doing a piece of freelance work which will bring in c.£3500 pa. How do I declare and pay tax on this? Do I have to fill in a full self-assessment form or do I just write a letter to HMRC informing them, and let them work out how to charge me? Also, would I pay the tax by cheque or would they adjust my tax code for the following tax year?

Dazed_and_C0nfused

I think for that amount you would need to complete a Self Assessment return.
But that has the advantage that you would probably be able to claim the Trading Allowance (assuming you have low or no expenses and the freelance work was not connected to your employment)

If you register now and file your return by 30 December and are still working and earning decent money then you can have the tax due included in your 2022:23 tax code, effectively an interest free loan from HMRC.

But if you prefer you can pay it by 31 January 2022. 

aroominyork

And presumably I can make an additional £2800 net payment (ie £3500 gross) into my SIPP to reflect the increased salary cap?

Dazed_and_C0nfused

Only if that is your actual profit, if you claim the trading allowance (or actual expenses) which mean a lower profit then the allowable pension contribution would be less.

aroominyork

Dazed_and_C0nfused said:

Only if that is your actual profit, if you claim the trading allowance (or actual expenses) which mean a lower profit then the allowable pension contribution would be less.

Yes, that makes sense - presumably because tax relief means you can only contribute as much as you've paid tax on (otherwise you would be reclaiming tax you never paid!) so if you use the full £1000 trading allowance that is £1000 less that was taxed?

Dazed_and_C0nfused

With relief at source contributions you can actually get tax relief even if no tax was paid in the first place 

You are limited by earnings though so if you have an extra £2,500 pensionable earnings the extra amount you could contribute would increase by £2,500 (subject to the annual allowance limit not being an issue).

aroominyork

One more question. The organisation for which I am doing a piece of self-employed consultancy (which was my sole employer until a few months ago - this is an ongoing piece of work which I am seeing through and for which they are paying me; I have a new 'main' job) will reimburse out-of-pocket expenses incurred. Do I need to declare these expenses on the self-assessment form or is it enough just to keep a record of them? 

Nearlyold

Do these expenses exceed £1000 p.a.? Are they genuine costs you  paid out that you can evidence or are they some notional allowance for disbursements? 

aroominyork

Nearlyold said:

Do these expenses exceed £1000 p.a.? Are they genuine costs you  paid out that you can evidence or are they some notional allowance for disbursements? 

Less than £1000, all genuine costs paid by me and supported by receipts.

Nearlyold

You should include the re-imbursement of these out of pocket expenses as business income on your tax return, then depending on the total of these reimbursed expenses and your other expenses (if any) you can either enter your total expenses on the tax return or use the Trading Allowance of £1,000 whichever is more beneficial for you.

aroominyork

One more question on this: if I invoice before 5 April but am paid after 6 April, can I still count the income towards the salary cap for SIPP contributions in the current (20/21) financial year.