Can I Do Freelance Work While I am Employed

In short, Yes! You absolutely can be employed and freelance on the side.  Actually, you will find that there are many freelancers holding onto full time or part time jobs while they grow their own freelance client base and their freelancing pays them the salary they need.

You should of course check whether you are under any contract that prohibits you from working as a freelancer while you are in employment and be careful not to tread on your employers toes for example, by stealing clients as this could give you a bad reputation and jeopardise your employment.

TAX!

If you have found additional work or are considering freelancing on the side of your job you should be aware that you do need to pay tax and possibly additional national insurance.

Unlike your employment income, where your employer takes responsibility for calculating, deducting and paying over income tax and national insurance on your behalf.  If you opt to become a freelancer it will be your own responsibility to pay calculate and pay over any tax and national insurance on any additional income you make.

You will continue to earn your money as normal through the PAYE system but you will need to let HMRC know that you are now freelancing (or self employed) and earning additional income that is not going through your monthly payslip.

How to Let HMRC Know You are Freelancing

First of all you must let HMRC know that you are self employed and you can do that online here. Once this process is completed HMRC will send you a UTR number (Unique Tax Payers Reference).  Keep this safe as you will need this code to file your Self Assessment Tax Return and to set up a Government Gateway Account so you can file your tax return online.

As you are a freelancer you are required to pay tax under Self Assessment which means you need to submit a personal Tax Return by 31 January each year detailing your trading income, the income tax and Class 2 & Class 4 National Insurance due as well as making a payment for the tax and NI due. Your tax return submitted by 31 January covers the previous tax year for example: your tax return due on 31 January 2018 details your trading income earned between 6 April 2016 to 5 April 2017.

Your trading income, somewhat confusingly, actually means your trading profits (all your income less all your allowable business expenses). Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties.

Next: How Much Tax Will You Pay?

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Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.