Advice on extra income opportunity
Discussion
This has been asked many times, but the results of the search haven't given me the answers I was after.
I currently work full time, and have been offered the opportunity to do some extra work on the side. I would not be employed and essentially be a consultant, and the work would be "as and when", nothing regular.
How do I need to get all this declared to stay legit, and am I correct in assuming I would get taxed the standard 20% on my full extra income? Do I need to be registered as a sole trader, or can I fill in tax returns forms as an individual? I guess a sole trader would not be possible as I'm currently renting (and would effectively run a business from home)?
I'm at the stage where I like the opportunity, but want to confirm everything it will involve before I do it.
Thanks in advance.
I currently work full time, and have been offered the opportunity to do some extra work on the side. I would not be employed and essentially be a consultant, and the work would be "as and when", nothing regular.
How do I need to get all this declared to stay legit, and am I correct in assuming I would get taxed the standard 20% on my full extra income? Do I need to be registered as a sole trader, or can I fill in tax returns forms as an individual? I guess a sole trader would not be possible as I'm currently renting (and would effectively run a business from home)?
I'm at the stage where I like the opportunity, but want to confirm everything it will involve before I do it.
Thanks in advance.
Alex@POD said:
This has been asked many times, but the results of the search haven't given me the answers I was after.
How do I need to get all this declared to stay legit,
Register as self employed on HMRC website.How do I need to get all this declared to stay legit,
Alex@POD said:
and am I correct in assuming I would get taxed the standard 20% on my full extra income?
No. If your total earnings exceeded £42k(ish) part of your income would get taxed at 40%Alex@POD said:
Do I need to be registered as a sole trader, or can I fill in tax returns forms as an individual?
It's the same thing.Alex@POD said:
I guess a sole trader would not be possible as I'm currently renting (and would effectively run a business from home)?
You don't need premises to be self employed or trading.Have a look on here and then feel free to ask any more questions
http://www.hmrc.gov.uk/selfemployed/
I do exactly this - I work as a freelance IT consultant to 4 firms in addition to my PAYE job 5 days a week.
I just fill out my annual tax form each year and pay them what it calculates my tax liability to be.
Remember, for any work you undertake, there are still legitimate expenses, travel, parking, phone calls etc. This comes straight off the bottom line, and you only pay tax on your profit.
Also, depending on how much you are earning, you may need to register for small earnings exemption from national insurance payments.
I just fill out my annual tax form each year and pay them what it calculates my tax liability to be.
Remember, for any work you undertake, there are still legitimate expenses, travel, parking, phone calls etc. This comes straight off the bottom line, and you only pay tax on your profit.
Also, depending on how much you are earning, you may need to register for small earnings exemption from national insurance payments.
Eric Mc said:
Why won't you be employed?
What about the additional work makes you think it is of a "self employment" nature?
I wouldn't be employed as the company is based abroad, and I'd only be doing a little work here and there to make sure their products are ready for the UK market. As such it would be too much hassle to get me on their books, and it's not something I'm comfortable dealing with "under the table", hence I thought I'd effectively be self-employed.What about the additional work makes you think it is of a "self employment" nature?
Alex@POD said:
This has been asked many times, but the results of the search haven't given me the answers I was after.
I currently work full time, and have been offered the opportunity to do some extra work on the side. I would not be employed and essentially be a consultant, and the work would be "as and when", nothing regular.
How do I need to get all this declared to stay legit, and am I correct in assuming I would get taxed the standard 20% on my full extra income? Do I need to be registered as a sole trader, or can I fill in tax returns forms as an individual? I guess a sole trader would not be possible as I'm currently renting (and would effectively run a business from home)?
I'm at the stage where I like the opportunity, but want to confirm everything it will involve before I do it.
Thanks in advance.
I acknowledge that others have answered your questions but would like to throw in my two cents.I currently work full time, and have been offered the opportunity to do some extra work on the side. I would not be employed and essentially be a consultant, and the work would be "as and when", nothing regular.
How do I need to get all this declared to stay legit, and am I correct in assuming I would get taxed the standard 20% on my full extra income? Do I need to be registered as a sole trader, or can I fill in tax returns forms as an individual? I guess a sole trader would not be possible as I'm currently renting (and would effectively run a business from home)?
I'm at the stage where I like the opportunity, but want to confirm everything it will involve before I do it.
Thanks in advance.
- To declare and stay legit you would need to register for Self Assessment with HMRC. You then declare your PAYE employment as well as your 'consultancy' and expenses related to that consultancy. So brush up on HMRC permitted expenses, the more you have the less tax you pay.
- You need to find out if your customer will accept you as a Sole Trader or as a Ltd Co only.
- Whether or not Sole Trader or Ltd Co, you need to get Professional Indemnity and Public Liability insurance. Of course, you don't have to BUT if the proverbial hit's the fan and you're at fault then you need to be covered.
- Sole Trader makes no odds on a rented property, but some Tenancy Agreements prohibit registering a Ltd Co to the address. You get around that by registering the company to a registered office such as that provided by http://www.companiesmadesimple.com/company-service...
- If you go Ltd Co, that will kick off the Self-Assessment registration with HMRC.
- If you DO go Ltd Co then do seek out an accountant who can prevent you from falling foul of HMRC.
- If your gigs are few and far between then sole trader is the best option.
Finally, remember to put aside 20% of your invoices to cover your SA tax bill.
Obviously, if the gig is cash in hand then none of the above really applies LOL!
Edited by Chest Rockwell on Tuesday 17th June 14:49
Alex@POD said:
I wouldn't be employed as the company is based abroad, and I'd only be doing a little work here and there to make sure their products are ready for the UK market. As such it would be too much hassle to get me on their books, and it's not something I'm comfortable dealing with "under the table", hence I thought I'd effectively be self-employed.
Not necessarily so.I have run payroll schemes on behalf of foreign companies who wanted to make use of a UK based employee.
It sounds to me that your proper status is a "part time employee of a foreign based company".
The correct procedure is for the foreign company to appoint a payroll agent so they can set the company us as a UK employer. Then, the agent processes and handle the payroll on behalf of the company - issuing salary payslips to the employee(s), calculating the PAYE/NIC etc and submitting the payroll data to HMRC under the RTI system each month.
You can only operate as a self employed individual if you are genuinely self employed i.e. running a business in your own right.
To do this you will need to exhibit enough markers to HMRC that you really are trading on your own account - what they refer to as the badges of trade - such as -
who controls the work you do?
who determines when and how you do that work?
who is responsible for the work you do?
Who carries the can if any of the work you do has to be corrected - i.e. do you have any commercial risk if work needs to be corrected?
do you need to take out business type insurances?
can you substitute someone to do the work instead of you?
will you need to use your own equipment to carry out the work?
will you have a place of business?
Thanks Eric.
All these questions actually reinforce the idea I would be self-employed, as I would be responsible for doing the work when I want to and responsible for its quality. There is no liability to take into account as I would only supply them with info (e.g. manuals in proper English), but the final decision to use that info rests with them.
In addition, I could offer my services to several companies, who would be my clients.
This is the way I see it at the moment anyway.
All these questions actually reinforce the idea I would be self-employed, as I would be responsible for doing the work when I want to and responsible for its quality. There is no liability to take into account as I would only supply them with info (e.g. manuals in proper English), but the final decision to use that info rests with them.
In addition, I could offer my services to several companies, who would be my clients.
This is the way I see it at the moment anyway.
They may not.
UK businesses get a bit twitchy about using "self employed" individuals because HMRC could order them to put the individual onto the payroll - even if only as a part time employee. If a company receives such an instruction from HMERC, they may have to go back in time and calculate and pay over all the PAYE and NI they had failed to calculate, deduct and pay over to HMRC on that person's salary.
To get out of this possibility, they sometimes insist that these "casual" staff set up their own limited company. This gets the employer off the hook from having to find any underpaid PAYE/NI. Instead, if HMRC decides that PAYE and NI SHOULD have been paid, they will go to the one man band limited company and ask THAT company to pay over the missing tax.
This is the dreaded IR35 in operation.
In your case, the "employer" does not seem to have any operation in the UK so it would be hard for HMRC to insist that they set up a PAYE scheme - even if they perhaps should.
So, they may not even be aware of the way IR35 operates.
UK businesses get a bit twitchy about using "self employed" individuals because HMRC could order them to put the individual onto the payroll - even if only as a part time employee. If a company receives such an instruction from HMERC, they may have to go back in time and calculate and pay over all the PAYE and NI they had failed to calculate, deduct and pay over to HMRC on that person's salary.
To get out of this possibility, they sometimes insist that these "casual" staff set up their own limited company. This gets the employer off the hook from having to find any underpaid PAYE/NI. Instead, if HMRC decides that PAYE and NI SHOULD have been paid, they will go to the one man band limited company and ask THAT company to pay over the missing tax.
This is the dreaded IR35 in operation.
In your case, the "employer" does not seem to have any operation in the UK so it would be hard for HMRC to insist that they set up a PAYE scheme - even if they perhaps should.
So, they may not even be aware of the way IR35 operates.
Eric Mc said:
They may not.
UK businesses get a bit twitchy about using "self employed" individuals because HMRC could order them to put the individual onto the payroll - even if only as a part time employee. If a company receives such an instruction from HMERC, they may have to go back in time and calculate and pay over all the PAYE and NI they had failed to calculate, deduct and pay over to HMRC on that person's salary.
To get out of this possibility, they sometimes insist that these "casual" staff set up their own limited company. This gets the employer off the hook from having to find any underpaid PAYE/NI. Instead, if HMRC decides that PAYE and NI SHOULD have been paid, they will go to the one man band limited company and ask THAT company to pay over the missing tax.
This is the dreaded IR35 in operation.
In your case, the "employer" does not seem to have any operation in the UK so it would be hard for HMRC to insist that they set up a PAYE scheme - even if they perhaps should.
So, they may not even be aware of the way IR35 operates.
IR35 only applies to the 'Friday - Monday' scenario aka 'disguised employment' which has the benefits of PAYE employment whilst avoiding employer NI contributions. The OP is already in PAYE but will be doing one off consultancy as either a sole trader or Ltd Co. UK businesses get a bit twitchy about using "self employed" individuals because HMRC could order them to put the individual onto the payroll - even if only as a part time employee. If a company receives such an instruction from HMERC, they may have to go back in time and calculate and pay over all the PAYE and NI they had failed to calculate, deduct and pay over to HMRC on that person's salary.
To get out of this possibility, they sometimes insist that these "casual" staff set up their own limited company. This gets the employer off the hook from having to find any underpaid PAYE/NI. Instead, if HMRC decides that PAYE and NI SHOULD have been paid, they will go to the one man band limited company and ask THAT company to pay over the missing tax.
This is the dreaded IR35 in operation.
In your case, the "employer" does not seem to have any operation in the UK so it would be hard for HMRC to insist that they set up a PAYE scheme - even if they perhaps should.
So, they may not even be aware of the way IR35 operates.
The OP need not be concerned with IR35.
Eric Mc said:
I don't think you understand IR35.
I have been dealing with IR35 cases for 16 years and have attended numerous lectures on the subject.
It emphatically does not only apply to full time Monday to Friday activities =- although they are the most obvious targets.
I don't think you understand IR35 either. So shall we just agree to disagree?I have been dealing with IR35 cases for 16 years and have attended numerous lectures on the subject.
It emphatically does not only apply to full time Monday to Friday activities =- although they are the most obvious targets.
I'm happy to disagree with you
I will continue to advise any of my clients who embark on any sort of sub-contract work through a limited company (or partnership or LLP for that matter) that IR35 is something they need to be aware of and guard against, whether they are engaged full time or part time.
The advice we were given from the outset of IR35 was that having multiple engagements was no guarantee that some if not all of the engagements might fall within the remit of the IR35 rules.
A particular example we were given were partners of accountancy firms being seconded either full time OR part time to clients.
The IR35 rules could catch income from such a client so it would not be treated as income of the accountancy practice but as salary of the seconded partner.
The secret of avoiding IR35 was not MERELY down to the amount of time you worked for someone - but the overall nature of the relationship. So, time WOULD be looked at as a consideration when deducing the nature of the relationship - but it was only one criterium to be examined. Other factors needed to be looked at too.
Indeed, the factors that needed to be reviewed were essentially those "badges of trade" I mentioned above - which are a bit more extensive than a mere "full time/part time" test.
I will continue to advise any of my clients who embark on any sort of sub-contract work through a limited company (or partnership or LLP for that matter) that IR35 is something they need to be aware of and guard against, whether they are engaged full time or part time.
The advice we were given from the outset of IR35 was that having multiple engagements was no guarantee that some if not all of the engagements might fall within the remit of the IR35 rules.
A particular example we were given were partners of accountancy firms being seconded either full time OR part time to clients.
The IR35 rules could catch income from such a client so it would not be treated as income of the accountancy practice but as salary of the seconded partner.
The secret of avoiding IR35 was not MERELY down to the amount of time you worked for someone - but the overall nature of the relationship. So, time WOULD be looked at as a consideration when deducing the nature of the relationship - but it was only one criterium to be examined. Other factors needed to be looked at too.
Indeed, the factors that needed to be reviewed were essentially those "badges of trade" I mentioned above - which are a bit more extensive than a mere "full time/part time" test.
Eric Mc said:
I'm happy to disagree with you
I will continue to advise any of my clients who embark on any sort of sub-contract work through a limited company (or partnership or LLP for that matter) that IR35 is something they need to be aware of and guard against, whether they are engaged full time or part time.
The advice we were given from the outset of IR35 was that having multiple engagements was no guarantee that some if not all of the engagements might fall within the remit of the IR35 rules.
A particular example we were given were partners of accountancy firms being seconded either full time OR part time to clients.
The IR35 rules could catch income from such a client so it would not be treated as income of the accountancy practice but as salary of the seconded partner.
The secret of avoiding IR35 was not MERELY down to the amount of time you worked for someone - but the overall nature of the relationship. So, time WOULD be looked at as a consideration when deducing the nature of the relationship - but it was only one criterium to be examined. Other factors needed to be looked at too.
Indeed, the factors that needed to be reviewed were essentially those "badges of trade" I mentioned above - which are a bit more extensive than a mere "full time/part time" test.
Thanks for the insight, it's much appreciated. I will continue to advise any of my clients who embark on any sort of sub-contract work through a limited company (or partnership or LLP for that matter) that IR35 is something they need to be aware of and guard against, whether they are engaged full time or part time.
The advice we were given from the outset of IR35 was that having multiple engagements was no guarantee that some if not all of the engagements might fall within the remit of the IR35 rules.
A particular example we were given were partners of accountancy firms being seconded either full time OR part time to clients.
The IR35 rules could catch income from such a client so it would not be treated as income of the accountancy practice but as salary of the seconded partner.
The secret of avoiding IR35 was not MERELY down to the amount of time you worked for someone - but the overall nature of the relationship. So, time WOULD be looked at as a consideration when deducing the nature of the relationship - but it was only one criterium to be examined. Other factors needed to be looked at too.
Indeed, the factors that needed to be reviewed were essentially those "badges of trade" I mentioned above - which are a bit more extensive than a mere "full time/part time" test.
The problem with IR35 is that it was deliberately left rather woolly.
The reality is that HMRC has limited resources and tends to only pursue IR35 cases where they think the rules have been wildly ignored.
A good example is what is referred to as The Dragonfly Ltd Case.
http://www.hmrc.gov.uk/manuals/esmmanual/esm7290.h...
You can see that the key factors in this case centered, not on the time spent by the contractor at his clients, but on how he worked with them.
The reality is that HMRC has limited resources and tends to only pursue IR35 cases where they think the rules have been wildly ignored.
A good example is what is referred to as The Dragonfly Ltd Case.
http://www.hmrc.gov.uk/manuals/esmmanual/esm7290.h...
You can see that the key factors in this case centered, not on the time spent by the contractor at his clients, but on how he worked with them.
Gassing Station | Business | Top of Page | What's New | My Stuff