Starting self employed but also employed and tax credits ... help!

[LabradorMama]

Ok it's bit of a minefield but bear with me ...

I'm employed 16 hours per week and claim tax credits but DS has just started school and I'm trying to increase my earnings. I've just taken on a second job and I've split my tax code across the two employed roles. So far so good.

I've now been offered a third job which I'm really keen on and may end up being my main role next year, so I will drop one of the others. In the meantime it is a temporary, flexible role with different, irregular hours every week. For this reason they've asked me to invoice them rather than them putting me on the payroll.

I'm confused as to how all of this will work. Firstly, how and when do I declare the extra income? Will I need to complete a tax return?

And how will it work with my tax credits? Obviously I will inform the tax credits people of my second employed job. But with the third role I don't know how much I'm expecting to earn so I don't know how to handle it. If I leave it until my next renewal and state what I have earned thus far, will they base my renewal award on that figure? Potentially leaving me very short?

I'm keen to earn as much as I can myself but I've never been self employed and I'm getting myself in a state about it all. Any help from knowledgeable folk would be very much appreciated

You need to register as self employed with HMRC which effect belt tells them you need to do a self assessment tax return.

It's all online and pretty straightforward.

On the return there are fields to enter both your income from employment (you can list more than one job) and income from employment.

It will do the calculation for you with what you owe.

Tax returns are due by 31 January following the tax year, so 31 Jan 2019 for tax year 2017/18.

*effectively !!

Fecksake fat fingers - income from employment and SELF employment!

There's also fields to enter any benefits including tax credits.

I once had a year where I had 2 employment incomes, a self employed income, self employed expenses, dividends, a tax free severance payment, child tax credits and JSA - that was a fun tax return!!!

Ive done a bit of digging online and found how to register self employed, thank you. I also found the calculator (‘ready reckoner’) It doesn’t mention anything about being employed as well though.
My worry is that my tax credits will go down but I won’t earn as much as I hoped and I’ll be left short. I don’t have any savings too fall back on as money is so tight.
That tax return of yours sounds like my worst nightmare!!!!!

Or that I’ll get a huge tax bill I can’t pay. Basically I’m scared of being skint as I sail so close to the wind already

Although your tax return isn't due until 31 Jan you can do it anytime after 5 April pretty much and it will tell you there and then what you owe.

You can opt to have your tax code from the NEXT April adjusted or pay it in a lump, but you have until 31 January to pay it so plenty of time to save! and if your tax bill was over £1000 you'd have a payment on account to make, which is essentially paying half in July and half in January.

That said, if your self employed income is just a top up I doubt your tax bill would be that high?

As you're already using your personal allowance on your two jobs, you'll pay tax and NI on everything you make from your self employed income at between 32% and 41%.

If your total income (job1 + job2 + self employed income) is less than £46,350 you'll only pay 32% so for every £100 you invoice, stick £32 to one side and that will cover your tax bill!!

You pay £41 in every £100 for anything over £46,350.

Also, if you have expenses related to your self employed income (business use car insurance, proportion of car running costs related to that work, stationary etc etc) you can record these as expenses related to self employment on your tax return and they offset the income, so reducing your tax bill.

HMRC website guides are pretty good for showing what you can offset.

Hope that helps?

That is unbelievably helpful, thank you so much! I really appreciate the time you’ve taken to explain, thank you

No worries @LabradorMama