Freelancers' Questions: When to self-assess if I freelance and work full-time?

Freelancer’s Question: I began working as a freelancer in the UK during December 2014, and I registered for the online self assessment around mid-February. Currently I am working full time as a concept artist, and freelancing as an illustrator for a big company the rest of the time.

When would I need to provide the self assessment and pay my taxes – is it 31st January 2016 or before? And for which period would I be paying them for then?

Please note; I am neither an experienced freelancer nor a native English-speaker, so would like some clear guidance to help me avoid being fined for not paying the correct amount during the correct period, but I don't want to pay more than I should!

Expert’s Answer: Firstly, well done on registering with HM Revenue & Customs in good time; that’s great! Now HMRC knows to expect a tax return from you.

Now you need to choose which date you’re going to draw up your accounts to each year, and for sole traders the easiest date to choose is 5th April, which matches with the end of the tax year. This means you won’t end up paying tax on the same profit twice in the early years of your business (though you would get that back when the business stops).

The tax year that’s not long finished runs to 5th April 2015.So your first tax return that you need to send to HMRC by 31st January 2016 will include your self-employed accounts for the period from when you started trading, to 5th April 2015.

You can prepare your accounts either using the traditional method or, if it’s open to you, the ‘cash basis.’Briefly, the latter means you add up your income and day-to-day running costs based on when you received money from customers and paid money for costs, rather than on the basis of when you earned the income and incurred the costs.

When it comes to preparing your tax return, you’ll need to fill in a set of self-employment pages showing your business accounts, and as you also have a job, you’ll need to fill in a set of employment pages to show how much you earned and how much tax you paid on your salary.Although HMRC already has the information about your job earnings from your employer, they need to see all your income together, on one form - they need to see the picture ‘in the round.’ If you have any other income, such as income from a rented property, you’ll almost certainly need to put that on your tax return too.

Once you’ve filled in your tax return, you will see how much tax and Class 4 National Insurance you’re due to pay to HMRC for your business.Again, this will be due by 31st January 2016, and if your tax and NI bill amounts to more than £1,000 you’ll probably also have to make payments on account, which basically means you’ll have a payment to make in July as well. Whichever software you use (commercial or HMRC’s) should calculate how much you’ll have to pay and when, and show that to you.

Then, going forward, each year you’d need to fill in a tax return showing your income from all sources. Good luck!

The expert was Emily Coltman FCA, chief accountant at FreeAgent, an online accountancy solution tailored to the needs of freelancers and the self-employed.

Editor’s Note: Related Reading –

Freelancers urged to use ‘cash basis’ scheme

Freelancers’ Questions: When to register for self-assessment as a partnership?

Freelancers’ Questions: Is freelance income before self-employment ok?


31st May 2015

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