Working for employer and self at same time
Discussion
I'm sure this must have come up before, but after a quick search I can't find anything...
Anyway, I'm currently employed in a job I enjoy, and which pays regular money(!), but also get offered the odd bit of freelance Web development work. A project which I've been offered sounds like it'd happily pay a monthly maintenance and hosting fee, plus the upfront development costs, as this is likely to be a bit more of a job than knocking up a couple of Web pages, or 'fix this for £20', I'd like to do it properly and just wanted some general advice on how to go about it.
I figure that once I've got one person paying a monthly maintenance / hosting fee, that'll pay for my hosting and I'll effectively be able to host a few other sites 'for free'.
I don't expect this to be bringing in loads of money or anything - I'd be surprised if the whole lot came to much more than 1k this year (I've enough going on in to be able to spend much time developing a client base as this point in my life), but I'd really appreciate the advice of anyone who knows of the benefits or pitfalls, tax advice, etc, etc, like I said, I don't want to run this as a 'cash company', but don't want to spend the small amount that I do make on anything unnecessary - so I guess being a sole trader is the way to go?
Assume I'm an idiot ;-), all advice gratefully received!
Clive
Anyway, I'm currently employed in a job I enjoy, and which pays regular money(!), but also get offered the odd bit of freelance Web development work. A project which I've been offered sounds like it'd happily pay a monthly maintenance and hosting fee, plus the upfront development costs, as this is likely to be a bit more of a job than knocking up a couple of Web pages, or 'fix this for £20', I'd like to do it properly and just wanted some general advice on how to go about it.
I figure that once I've got one person paying a monthly maintenance / hosting fee, that'll pay for my hosting and I'll effectively be able to host a few other sites 'for free'.
I don't expect this to be bringing in loads of money or anything - I'd be surprised if the whole lot came to much more than 1k this year (I've enough going on in to be able to spend much time developing a client base as this point in my life), but I'd really appreciate the advice of anyone who knows of the benefits or pitfalls, tax advice, etc, etc, like I said, I don't want to run this as a 'cash company', but don't want to spend the small amount that I do make on anything unnecessary - so I guess being a sole trader is the way to go?
Assume I'm an idiot ;-), all advice gratefully received!
Clive
Yes - sole trader.
You will need to inform HMRC within three months of commencing business and you may need to pay Class 2 NI. However, if your Self Emplyed earnings are going to be below £5,000 for 2006/07 you will be able to slaim the Small Earnings Exception from having to pay the Class 2 NI.
You can also escape Class 2 NI if you are already paying the maximum possible Class 1 NI in your employment.
You will also discover the joys of having to complete a Self Assessment tax return.
You will need to inform HMRC within three months of commencing business and you may need to pay Class 2 NI. However, if your Self Emplyed earnings are going to be below £5,000 for 2006/07 you will be able to slaim the Small Earnings Exception from having to pay the Class 2 NI.
You can also escape Class 2 NI if you are already paying the maximum possible Class 1 NI in your employment.
You will also discover the joys of having to complete a Self Assessment tax return.
back in 1982 my dad set up a mini company to provide him with a little extra income.
Every year he did 4 or 5 weekends work as a freelance systems analyst and every year managed a tax 'loss' of about £100 after paying for a new Vic 20 with 64 K upgrade, printer, floppy disc drive, and use of the spare room, car, phone etc. I'm no accountant and neither was he. he just got a couple of books from the local libary (claiming the mileage I assume) so that he could work out what was and was not a business cost.
In real terms he brought in £1000 a year extra.
Every year he did 4 or 5 weekends work as a freelance systems analyst and every year managed a tax 'loss' of about £100 after paying for a new Vic 20 with 64 K upgrade, printer, floppy disc drive, and use of the spare room, car, phone etc. I'm no accountant and neither was he. he just got a couple of books from the local libary (claiming the mileage I assume) so that he could work out what was and was not a business cost.
In real terms he brought in £1000 a year extra.
Have already had that joy(!) - about 8 years ago I spent three months doing Web design as a sole trader, but wondered what had changed, and what the differences were if I was working for an employer at the same time.
Is it possible to claim for things like subcontracting out the design aspect of the Website (ie: client pays me 1k for the whole thing, I pay the designer 300)?
I assume I'd just need to keep track of income / outgoings, and the bottom line is what would go on my SA tax form?
Like I said, assume I'm an idiot
CH
Is it possible to claim for things like subcontracting out the design aspect of the Website (ie: client pays me 1k for the whole thing, I pay the designer 300)?
I assume I'd just need to keep track of income / outgoings, and the bottom line is what would go on my SA tax form?
Like I said, assume I'm an idiot
CH
One thing you should check is your contract of employment with your permanent employer.
If they claim exclusive rights to you (ie. prohibit you from moonlighting or having other jobs) then you may need to negotiate a variation to that to allow you to do what you're proposing.
Other than that, it's a simple case of declaring yourself a Sole Trader and filling in a Self Assessment tax return each year (as has already been mentioned)
If they claim exclusive rights to you (ie. prohibit you from moonlighting or having other jobs) then you may need to negotiate a variation to that to allow you to do what you're proposing.
Other than that, it's a simple case of declaring yourself a Sole Trader and filling in a Self Assessment tax return each year (as has already been mentioned)
Any costs incurred "wholly and exclusively for the purpose of the trade" can be claimed as a tax deduction for legitimate business purposes - with the odd exception ("Entertainment" being one). Some costs are claimed in the form of "Capital Allowances" rather than as a straightforward deduction against profits.
If your turnover (sales) for the tax year is less than £15,000 you should be able file a simple "Three Line" set of accounts. In fact, the Self Employment Pages of the Self Assessment Tax Return has a special section for such "Three Line Accounts".
If your Self Emploment accounts show a trading loss, you are allowed offset that loss against "Other Income in the Same Tax Year" and therefore claim a tax refund if that "Other Income" haed already been subject to tax. Other Income usually means PAYE Salary or Bank Interest Received.
If you cannot or do not want to ofset a trading loss against "Other Income" in the same tax year, you can carry it forward to the next and future tax years. However, once brought forward, the trading loss can only be offset against future trading profits FROM THE SAME BUSINESS ONLY.
If your turnover (sales) for the tax year is less than £15,000 you should be able file a simple "Three Line" set of accounts. In fact, the Self Employment Pages of the Self Assessment Tax Return has a special section for such "Three Line Accounts".
If your Self Emploment accounts show a trading loss, you are allowed offset that loss against "Other Income in the Same Tax Year" and therefore claim a tax refund if that "Other Income" haed already been subject to tax. Other Income usually means PAYE Salary or Bank Interest Received.
If you cannot or do not want to ofset a trading loss against "Other Income" in the same tax year, you can carry it forward to the next and future tax years. However, once brought forward, the trading loss can only be offset against future trading profits FROM THE SAME BUSINESS ONLY.
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