Freelance work whilst working full time PAYE
Discussion
If the freelance work is conducted through a limited company, in theory the company pays 20% Corporation Tax on its profits. You pay NO Income Tax or NI on the money coming into the company UNLESS you draw the money out in the form of salary (PAYE and NI) or dividends (Income Tax only).
HOWEVER, there are all sorts of pitfalls you need to be aware of (such as the impact of IR35 and the new rules coming in regarding the taxation of dividends).
You need to talk to an accountant.
There are also non-tax issues you might need to be considering too - such as how it plays with your current employers and your own liability for work done as a freelancer.
HOWEVER, there are all sorts of pitfalls you need to be aware of (such as the impact of IR35 and the new rules coming in regarding the taxation of dividends).
You need to talk to an accountant.
There are also non-tax issues you might need to be considering too - such as how it plays with your current employers and your own liability for work done as a freelancer.
I was in the same position a number of years ago and incorporated a limited co through which these 'sideline' freelance ventures were channeled... they grew and a few years later I made the leap into contracting and it was useful to already have an established business with a little pool of cash on the side. As Eric says you need to understand the rules and responsibilities associated with doing this, and whether your employment contract prevents you from having other employments or controlling business interests.
If taking a 'small' (relative to salary) profit from freelancing and without any other dividend income from shares, the new tax rules may play into your favour - you'll have a £5k allowance which is tax free (though you'll pay Corporation Tax) but after that it's 32.5% which, combined with 20% CT is an effective rate of 46%
If taking a 'small' (relative to salary) profit from freelancing and without any other dividend income from shares, the new tax rules may play into your favour - you'll have a £5k allowance which is tax free (though you'll pay Corporation Tax) but after that it's 32.5% which, combined with 20% CT is an effective rate of 46%
Edited by theboss on Tuesday 24th November 19:11
Gassing Station | Business | Top of Page | What's New | My Stuff