Tax on self employed second role, help!

[BobMunkhouse]

I was wondering if anyone could offer some advice, I have a main "employed" job which I get paid monthly for and I also have a freelance role which I do evenings and weekends on a self employed basis.

This is my first few months doing both of these jobs, but I have been told that I don't file my tax return for the freelance self employed role until the year after I've earned that money? Is that correct? Also will my full time role be effected by the freelance role?

I am totally clueless and don't want to end up with a huge tax bill, and I also don't want my full time salary to be compromised as if so I'll give up my freelance role.

Thank you so much for anyone who can offer me any wisdom, me and numbers do not mix. Should probably hire an accountant really.

You need to get an accountant. They can talk you through what you need to be saving and how it all works, and for around £250-£400 will do your self assessment for you. There are all sorts of allowances, rules etc that they know about that you won't. Keep two thirds of the profit from the self-employment to one side to cover your tax and national insurance that you'll need to pay when it's the end of the tax year (basically, if your tax bill comes to more than a grand, you have to pay the next year's upfront as well, despite the fact that you don't know how much it would be, if you owe less tax and national insurance the second year then you may get a refund). It's complicated, so definitely get an accountant!

Have you made a typo @Mondy ? Why would you need to keeps two thirds of your profit for taxes?

How much do you think you'll be earnings from your self employed work OP and is it the sort of job work where you need tools or equipment or anything complicated?

If you're simply getting paid for your time you wont need an accountant to do a self assessment return

Thank you both, roughly 10k a year for the self employed role. No tools other than a laptop!

hello! I believe you can file your tax return not long after your tax year ends - typically the latest you can file it is 31st Jan the year after the tax year ends. So my tax year runs to end of March, then the following Jan is the final deadline for filing. But you can choose to file it earlier if you want, e.g. I try to do it in early April just so I know exactly what my position is and full earnings.

Regarding saving for NI and Tax, you can work out a rough guess of your upcoming tax using something like this:

https://www.employedandselfemployed.co.uk/tax-calculator

It will show you how much you owe for tax if you put in your estimated self employed earnings. That way you have a clearer ongoing idea if you average out your earnings over the year based on a guess (you could check it each month to see if you need to make a further adjustment calculation if you wanted).

This will give you a rough idea of your tax and NI for the year you will need to pay.

You don't need to wait to pay the tax and NI - what I tend to do is set up a direct debit for a proportional monthly payment based on an average guess of what I will owe, for that month. I find that preferable to getting a huge tax bill at the end of the year that is shocking.

Then at the end of the tax year, if you've overpaid, you can claim a rebate. It might take some weeks to come through.

With regards to tax returns, sometimes it will ask you to pay the following year's tax (or a percentage of it!) in advance. This can catch some people out. I suggest a chat with an accountant - or HMRC (free) would be helpful. They can be hard to get hold of though. They are generally helpful when you can reach them.

You don't necessarily need an accountant but an initial chat with one might be helpful. You can also get book keepers who might be cheaper as well. And I often use ChatGPT to clarify stuff if I am baffled (granted it isn't always right, so double check anything it says!).

@watchseehear thank you so much, that tool is really helpful! I think I understand a bit more now, best best is probably to pay a bit in each month and then not be faced with a huge bill. I will try and get into contact with HMRC too. Thanks again for your help!

Hey, accountant here and I do self assessments quite often
Financial tax year in UK runs from 6th April - 5th April the following year. You have until 31st January of the following year to submit taxes, however if you’ve never been self employed before and have only just registered, you can go as far back as 2 years to input your numbers
the freelance income will affect tax, but the amount by which this will, depends on your salary at your current employed place. If both incomes are under 50k, then you’re at a 20% tax rate. Every £1 above that will be taxed at 40%. However, it also depends on what the freelance activity is, what your expenses are etc.

No worries!

Definitely bear in mind the thing about them asking you for the following year's tax percentage when you file your return though. If you've been paying monthly, you might not need to pay this. If you haven't then it might come as a massive shock as it seems like you have a big extra bill to pay! Worth factoring it in. I don't think HMRC's procedures are massively clear and it can baffle the ones of us who have been doing it years.

Also make sure you're claiming relevant expenses where it's appropriate. there's a flat fee you can charge if you are working from home, something like £15 or £20 a month, towards bills (energy etc) depending on the number of hours you work. You might also be able to claim a separate portion of your internet costs and so on if you use it for work. Hope this is helpful!

The reason I said hold back 2 thirds of the profit is that she will be taxed at 20% (depending on her total income, it could even be 40%) and will have to pay NI at 10%, so 30% total. When you're self employed, if you are assessed as having to pay more than about £1k in tax and NI then you have to pay the next year's tax upfront as well, so you'll need to be able to pay 60% (actual year 1 - 30% and expected year 2 - 30%). Keeping back two thirds is an easy way to do this, and should leave some money free to pay the accountant.