self employed

[stevestar123]

hi

I have worked for the same company scince i was 17 (now 34) But i would now like to work for myself as i am a joiner i'd like to try and build up a customer base before i leave my firm

question is if i stated to do my own work at weekends/night how would this effect my tax etc?

cheers

[Buenchico]

You'd have to complete a tax return in the same way that a person who is solely self-employed does. On the form you'd be able to enter details of both your employed and self-employed earnings.

Because your tax allowance will have already have been used up when calculating your PAYE tax deductions, you'll have to pay tax on all of your self-employed earnings. This means that the tax man will probably want 22% of all your self-employed earnings. If, however, your total gross income (i.e from both types of employment put together) exceeds �37,295, then you will have to pay the tax man 40% of all your income above this level. (That cut-off figure is valid for the current tax year. It rises slightly each April).

You should ask HMRC about the position regarding National Insurance. I know that someone who has two employed jobs has to pay Class 1 National Insurance contributions on both jobs, so I assume that you'd also have to pay Class 2 (self-employed) National Insurance contributions on your self-employed earnings. If this is the case, then, if the profits from your self-employment exceed �4895, you'll have to pay 8% of your profits above that level as Class 4 NICs.

Chris

[stevestar123]

if i get enough work to be self employed the night weekends ont be that much at start if anything

that why i was asking really at what point should i be telling the tax man i dont wanna do couple jobs tell tax man then get nothing more an carry on fully employed only for taxman to come after me saying i fiddling doing jobs off the books

also could i claim back anything for tools etc i need to buy?

cheers

[stanleyman]

All you really need to do for at least the first year is keep a record of all your self employed income and all your business expenses. Keep cost of materials and running expenses separate. Expenses includes costs of vehicle, fuel, tools, equipment, telephone, postage, rent, rates, office etc.

The taxman is only interested in any profit and this is unlikely in the first year after you have taken off your costs and expenses. If after the first year you have made any money and are intending to carry on then you need to tell the taxman who will send you a self assessment form for the previous year. The form is quite simple if your turnover is less than �15,000. You will only pay tax on your profits if any, above your normal PAYE.

[Eejit]

If you go self employed one thing you should take into consideration is class 4 NIC. This is basically a stealth tax. You will have to pay a further 8% of your net income to the inland revenue. This is after your allowances and after you have already paid your 22%.

[kags]

If you are intending to do freelance work, you must tell HMRC straight away in order to sort out your National Insurance contributions. You should start paying Class 2 Contributions (currently �2.10 a week), unless you think your earnings from self employment will be below �4345 in the tax year, or if you are already paying the annual maximum normal contributions through your employment (if you earn �32670 or more). In the latter case, you will still be liable to Class 4 contributions at a rate of 1%, these contributions are assessed and paid with your tax bill.

As regards whether you tell HMRC straight away, you must notify the tax office within 3 months of starting, or face a fine. If you do a couple of jobs then decide not to continue, it is entirely up to your conscience whether you declare them to HMRC, bering in mind that if you don't, and they find out, you could face another fine.

You can claim for any expenses you incur, as mentioned above, but large capital items cannot be deducted in full, a capital allowance for depreciation is given instead.