MegaSack DRAW - This year's winner is user - rgwb
We will be in touch
Currently work full time, but looking to add a bit of freelance spice to the mix. Have a job lined up, nothing monumental, but looking at getting say £5k for it. Potentially more to follow. Just wondering what options I have regarding payment.
I'm an above board sort of guy, so not wishing to avoid tax, but happy to work the tax system efficiently.
I'm guessing that I can just take the money, and declare on my tax return. Not that I fill one out now, but will do, and assume adding in the income is fairly straight forward?
But then I'm thinking that I've been meaning to upgrade my work tools for ages, and £2.5k would do that nicely. Is there a way I can do that and set it off against tax?
Then are what about setting up a company, at what point should I consider that?
All advice welcome.
Talk to HMRC is the first thing, but you should be able to write of tools.
IANAA
APF
What does your current employment contract say? Mine has a clause about external employment and conflict of interest.
Good point JB, will dig it out and have a look. Though the fields of work don't overlap, and the freelance will be strictly in out of hours etc.
I've had contracts that prevent (not sure how enforceable it is) you from doing another job regardless of the field.Setting up a company would probably soak up a lot of your cash, best bet is to speak to an accountant about your options.
I had assumed speaking to an accountant would also soak up a lot of the cash 😉
Setting up a company won't soak up more than a few pounds. It's also really very quick and easy to do. Took me about an hour, most of it dreaming up a name that was not already used.
Worth having a decent accountant, though. That will cost you a few hundred pounds a year to do both the companies and your personal tax returns etc. But that's a cost at the end of the year, not now.
Rachel
Are there any benefits to the company route, for the odd bit of work? I sort of assume it would only be important when there are more than one person etc.
Lots of one man 'companies' out there. There are a few benefits from a tax and liability point of view but maybe not worth it for the odd job. A lot will depend on what tax bracket you are in your own moral compass regarding tax avoidance. The easy option is to register with HMRC as a sole trader then fill out out a self assessment at the end of the year. Zero cost to you and you'll pay a similar amount of tax to PAYE.
Depending what you current income is and what you're planning on doing would dictate your route of sole trader or limited.
The tools if used for the business would be allowable as capital expenditure as would any at the market rate that you introduce to start the business.
So the way I see it panning out are one ways...
1. (most likely) I stay with current employer, and do the occasional bit of work on the side, say £5k/yr.
2. I drop the full time job and go full time freelance.
In reality, what is likely to happen is a drift from 1 to 2. At what point would starting the company make sense?
Presumably capital expenditure can only be claimed if with a company?
Oh, and current income puts me in the high rate bracket (just)
Capital expenditure can be claimed by either limited or sole trader. Again a good accountant will save you more than they cost.