Earning money on the side
Discussion
What’s the best way to go about legally earning money on the side?
I've been offered some freelance website development work, which I can do in the evenings/weekends. I have cleared it with my employer and they have no problems with me doing it, but I'm unsure how to go about paying the relevant tax on money earned.
I currently earn just below the higher rate tax limit, and the work I'd like to do is paying £1000, but it could lead to more work.
Any advice would be welcome, as I'd like to sort out the legalities of it before I commit.
I've been offered some freelance website development work, which I can do in the evenings/weekends. I have cleared it with my employer and they have no problems with me doing it, but I'm unsure how to go about paying the relevant tax on money earned.
I currently earn just below the higher rate tax limit, and the work I'd like to do is paying £1000, but it could lead to more work.
Any advice would be welcome, as I'd like to sort out the legalities of it before I commit.
There definitely will be a need to return this income to the tax authorities.
It seems that this income is being looked on by both you and the people paying you as a form of Self Em[ployed income rather than wages subject to PAYE,
On that assumption, the standard way is to complete a Self Assessment tax return and fill in the section dealing that deals with Self Employment.
Don't forget that the income can be reduced by the offset of allowable "business related" expenses and Capital Allowances if appropriate.
Self employed income is also subject to National Insurance - both Class 2 and Class 4. The legal requirement is that you notify the Revenue that you have commenced earning some Self Employed income within three months of the coomencement of the Self Employed activity. However, if the Self Employed activity for the year is going to generate [rofits which are below the National Insurance threshold (around £5,400 for 2008/09), then you can apply to be exempted from having to pay the Class 2 NI normally payable.
Self Employed individuals are expected to prepare Self Employed accounts showing their Income and Expenditure - and resulting profit.
If the turnover (sales) derived from Self Employment is less than £30,000 (being raised from £15,000 on 6 April 2008), then a simple set of "Three Line Accounts" need only be returned to the Revenue . The three lines referred to are:
Sales
Expenditure
Profit/Loss
The tax return allows these three figures to be entered ditrectly in a set of boxes specifically for this purpose.
Hope that helps.
It seems that this income is being looked on by both you and the people paying you as a form of Self Em[ployed income rather than wages subject to PAYE,
On that assumption, the standard way is to complete a Self Assessment tax return and fill in the section dealing that deals with Self Employment.
Don't forget that the income can be reduced by the offset of allowable "business related" expenses and Capital Allowances if appropriate.
Self employed income is also subject to National Insurance - both Class 2 and Class 4. The legal requirement is that you notify the Revenue that you have commenced earning some Self Employed income within three months of the coomencement of the Self Employed activity. However, if the Self Employed activity for the year is going to generate [rofits which are below the National Insurance threshold (around £5,400 for 2008/09), then you can apply to be exempted from having to pay the Class 2 NI normally payable.
Self Employed individuals are expected to prepare Self Employed accounts showing their Income and Expenditure - and resulting profit.
If the turnover (sales) derived from Self Employment is less than £30,000 (being raised from £15,000 on 6 April 2008), then a simple set of "Three Line Accounts" need only be returned to the Revenue . The three lines referred to are:
Sales
Expenditure
Profit/Loss
The tax return allows these three figures to be entered ditrectly in a set of boxes specifically for this purpose.
Hope that helps.
They'd love you to.
The forms are being radically altered for 2008/09 (the fist time since Self Assessment was introduced 11 yaers ago). Up to now, you could ask for a Short Form (only 4 pages) which might be more suitable for your circumstances.
However, I'm not sure if they are continuing with the Short Form for 2008/09 onwards.
They are claiming that the new style Self Assessment tax return is "simpler" than the earlier version. Having seen some "dummy" versions on the HMRC website, I'm not so sure.
If you want to see what's ahead of you, do a Google search under Self Assessment Tax Return 2008/09 and see if youy can track down the sample form on their website.
The forms are being radically altered for 2008/09 (the fist time since Self Assessment was introduced 11 yaers ago). Up to now, you could ask for a Short Form (only 4 pages) which might be more suitable for your circumstances.
However, I'm not sure if they are continuing with the Short Form for 2008/09 onwards.
They are claiming that the new style Self Assessment tax return is "simpler" than the earlier version. Having seen some "dummy" versions on the HMRC website, I'm not so sure.
If you want to see what's ahead of you, do a Google search under Self Assessment Tax Return 2008/09 and see if youy can track down the sample form on their website.
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