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Part-time freelancing - how to avoid tax hell
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Part-time freelancing - how to avoid tax hell

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Earning money from full-time employment and freelancing can complicate your tax affairs significantly - it's important to understand how both income streams are taxed. …

Earning money from full-time employment and freelancing can complicate your tax affairs significantly - it's important to understand how both income streams are taxed.

The Freelance Advisor team run through the Income Tax and National Insurance implications of moonlighting!

Published in: Business

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  • 1. The part-time freelancer How to avoid tax hell
  • 2. Growth in self-employment 2011 2013 300,000 new freelancers in 2 years
  • 3. More part-time freelancers than ever ▪ Self-employed pay tax differently to permanent employees ▪ Not taxed “at source” (PAYE) - pay at Self Assessment every January ▪ More leg-work to calculate tax owed & save appropriately
  • 4. When should you register as self-employed? ▪ Straight away! ▪ Can register online - http://crch.co/1dB0abf ▪ Very latest is October 5th AFTER tax year you became self-employed Example ▪ Started freelancing in July 2013 (2013/14 tax year) ▪ 2013/14 tax year ends 5th April 2014 ▪ Must register by 5th October 2014 ▪ Must file first Self Assessment by 31st January 2015
  • 5. Very ballpark tax saving guidelines Sole traders should save 30%for tax payments Limited Co.’s should save 20%for tax payments
  • 6. How tax is paid Permanent employment income Freelancing income Class 1 National Insurance Class 2 & 4 National Insurance Income Tax
  • 7. Income tax rates Permanent employment income Freelancing income Personal Allowance (0%) £0 £10,000 £20,000 £30,000 £40,000 £50,000 Basic rate (20%) up to £31,865 Higher rate (40%) up to £150,000
  • 8. Whose responsibility? Income Tax and NICs paid through PAYE by your employer (but you’ll need these figures to calculate tax on your freelancing income at Self Assessment) Income Tax - paid by you at Self Asse Class 2 NICs - paid by you weekly if profits over £5,725 Class 4 NICs - paid at Self Assessment on profits between £7,755 and £41,450 Permanent employment income Freelancing income
  • 9. Other resources In-depth explanation - http://crch.co/1fkWZ5X Register as self-employed - https://www.gov.uk/set-up-sole-trader