Earning money from full-time employment and freelancing can complicate your tax affairs significantly - it's important to understand how both income streams are taxed. The Freelance Advisor team run through the Income Tax and National Insurance implications of moonlighting!

1. The part-time freelancer
How to avoid tax hell

2. Growth in self-employment
2011 2013
300,000 new freelancers in 2 years

3. More part-time freelancers than ever
▪ Self-employed pay tax differently to permanent
employees
▪ Not taxed “at source” (PAYE) - pay at Self Assessment
every January
▪ More leg-work to calculate tax owed & save
appropriately

4. When should you register as self-employed?
▪ Straight away!
▪ Can register online - http://crch.co/1dB0abf
▪ Very latest is October 5th AFTER tax year you became
self-employed
Example
▪ Started freelancing in July 2013 (2013/14 tax year)
▪ 2013/14 tax year ends 5th April 2014
▪ Must register by 5th October 2014
▪ Must file first Self Assessment by 31st January 2015

5. Very ballpark tax saving guidelines
Sole traders should save
30%for tax payments
Limited Co.’s should save
20%for tax payments

6. How tax is paid
Permanent
employment
income
Freelancing
income
Class 1
National
Insurance
Class 2 & 4
National
Insurance
Income Tax

7. Income tax rates
Permanent
employment
income
Freelancing
income
Personal
Allowance
(0%)
£0
£10,000
£20,000
£30,000
£40,000
£50,000
Basic rate
(20%) up to
£31,865
Higher rate
(40%) up to
£150,000

8. Whose responsibility?
Income Tax and NICs paid through
PAYE by your employer (but you’ll
need these figures to calculate tax
on your freelancing income at Self
Assessment)
Income Tax - paid by you at Self Asse
Class 2 NICs - paid by you weekly
if profits over £5,725
Class 4 NICs - paid at Self
Assessment on profits between
£7,755 and £41,450
Permanent
employment
income
Freelancing
income

9. Other resources
In-depth explanation - http://crch.co/1fkWZ5X
Register as self-employed - https://www.gov.uk/set-up-sole-trader