Tax for an extra income while remaining employed
I am working as a full-time permanent developer and recently I have been asked to do an extra project from a different company. I am a beginner for freelance job so I wonder how I report my extra income and pay tax. My full-time salary is around 40k(p/a). I will work on the extra project for 4 months where I will earn about £7000. This won't be renewed so it is a single-time project.
Could you kindly let me know easy steps about what I need to do for tax?
Thank you in advance for your advice.
- Hi Joungmin,
All tax from your full time employment will be deducted when you get paid.
When it comes to completing your Self Assessment (if you begin work after the new tax year in April you won't need to complete a self assessment until after April 2018 and before January 2019).
You will have to pay class 2 and class 4 national insurance on your self employment income. Currently these rates for 16/17 are;
Class 2 £2.80 a week
Class 4 9% on profits between £8,060 and £43,000
2% on profits over £43,000
Most people pay the contributions as part of their Self Assessment tax bill.
these are now not due to change with the new tax year.
You will need to keep details of income and outgoings in your self employment and keep details of any expenses you incur (I can send you our expenses advice note). Claiming expenses will lower your tax bill at the end of the year.
Its a good idea to retain some money for your tax bill so you won't have to fork out a lump-some of money when you receive your bill.
Please don't hesitate to get in touch if you would like some further advice on trading as a Sole Trader.
- Joungmin, A version of your question was answered by an expert on the FreelanceUK front-page!
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