UK Freelance Tax
October 2, 2009 12:05 AM   Subscribe

I am based in the UK and currently in full time employment. I have been approached to complete a short to mid term freelance project that will roughly take 10 hours of my time each week. What do I do about VAT / NI / Tax? I have read that I do not need to be VAT registered but what about NI & Tax. How do I ensure the taxman does not come chasing me or my freelance employer!
posted by errspy to Work & Money (4 answers total) 4 users marked this as a favorite
 
You need to register as self-employed.

You may also want to have a quick word with an accountant, or at least look into which of your expenses you can now offset against tax, for example, some of your home expenses if you are working from home.
posted by emilyw at 12:19 AM on October 2, 2009


Firstly, don't fret. In my experience, HMRC is very helpful and understanding (no, really), even if you're late or don't know what you're doing. Things generally only turn nasty if you're dishonest or don't pay what you owe.

Just give them a call and explain what you're doing. If you're likely to do more freelance work, or 'mid term' is sufficiently long, or you're earning a fair bit, you might need/want to register as self-employed, or they might suggest handling it as a one-off payment.

I doubt you'll be able to get away with claiming home or capital expenses for working 10 hours a week (e.g. if you buy a computer it's clearly not going to be exclusively for the business), but if you register as self-employed you'll certainly be able to claim for specific freelance-related things like any travel to see the client, any materials, etc.
posted by malevolent at 1:12 AM on October 2, 2009


emilyw is right. This means you'll have to complete a self-assessment tax return at the end of the year, and even if you then decide you don't want to freelance again, probably for a couple of years after that (it's easier to get into self-assessment than back out of it).

Good news is that unless you're the lucky recipient of lots of share and other investment income as well as a job and this gig, the self assessment form isn't hard to complete, especially if you do it online and read HMRC's guidance documents. And your revenue office will be really helpful if you phone them for advice, as well, in my experience.

Do ask an accountant for advice on what to offset. You'll be limited by only offsetting home costs while you're on the gig, rather than for the whole financial year, and also by the limits on what you can claim, which is where they can help. Modest claims will help keep you under HMRC's 'should we poke around?' radar, so don't try and go mad.

They won't chase your freelance employer.

Self-assessment will cover you for any additional NI and tax you should pay. Best thing is to save 30-40% of your freelance income to pay this, and ask your accountant about how to pay it - you might be better to ask to pay the additional sum in one go, as your employer might wonder why you've got to pay additional tax and NI through your paycheck otherwise. You don't say if you're keeping this quiet from them but let's assume you are.

Unless your freelance work alone is worth more than £67,000 you don't have to register for VAT and keeping clear of it avoids a whole load more paperwork.
posted by dowcrag at 1:18 AM on October 2, 2009


HMRC are very helpful - there are free courses available on how to do it - I would go to your large library (town or city library) and see if they have a Business Insight service - they are great and can give you the forms for setting yourself up etc. I'm in the middle of doing this at the moment, so feel free to send me a message if you want to chat about it!
posted by LyzzyBee at 7:43 AM on October 3, 2009


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