Freelancer’s Question: Like many people I'd like to do the odd
"job on the side" to boost my income whilst keeping my full-time job
without complications. My employer is happy for me to do this and I can
get the work but what do I need to do tax-wise?
Expert’s Answer: Most people who freelance started out by doing
the odd bit of work on the side for friends, colleagues, ex-employers
and the like until they realise that the part-time work would be
sufficient for them to live on and so they decide to make the jump into
full-time freelancing. One of the most common questions therefore is at
what point should you tell the taxman about your part- time income.
The rather depressing answer is “immediately”. Once you’ve undertaken
your first piece of part-time freelance work you are obliged to
register with the HM Revenue & Customs to let them know about the
additional income. You have a three-month window during which you must
register and failure to do so will result in a £100 fine.
You can register by phone or online .
Once you have registered you will be classed as a “self-employed”
person, and will be sent a tax return to complete once per year. On
this form you will detail your income and any expenses you have
incurred. Any profits you make will be liable to tax at whatever rate
your current level of employment income is taxed at (either 20% or
40%), and any losses you make can be offset against your employment
income, thereby generating a tax refund.
If you get to the point where you do decide that freelancing is the
life for you and you decide to freelance full-time you can continue on
this self employed basis, or you could consider opening up your own
company which can bring tax benefits.
Answer provided by Simon Dolan, founder and managing director of SJD Accountancy .
May 7, 2008
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