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Declaring extra income

Discussion in 'General Business Forum:' started by Offelias, Jul 6, 2012.

  1. Offelias

    Offelias Member

    Hi guys,

    I've been a lurker for quite some time but rarely post.

    I have just graduated and have started freelance work.
    I work part time in a secure job which I won't leave until I've built up enough clients to enable me to do so.

    So this morning after a meeting, I have my first job which totals 2k and the deposit is being paid later today.
    Time frame for completion is a few months - a set amount of completed work as discussed, including 3 revisions.
    I'm drawing up a contract both for herself and for my reassurance as per the discussion today.

    My question is how to go about declaring this extra income without messing up the automatic tax from my PAYE.
    I've read a little but find it quite confusing. As I understand, I leave my PAYE as is, and fill out an additional form that pertains to the extra only?

    The client is in fact an accountant but I don't want to appear unprofessional, although she is aware of my newly graduated/inexperienced status.
    (She found my work at the degree show).


    Also, I'll be purchasing a new laptop in the next two weeks for design-on-the-go and client meetings, which as I understand can be classed as direct expenditure for my extra income.


    So confusing especially with already having a job :)
    But with the amount of money this is I can't afford to just ignore the fact that I need to declare it.

    Any guidance would be very appreciated.

    Thanks,
    Ophelia
     
  2. Paul Murray

    Paul Murray Moderator Staff Member

    I'm no expert so this could be wrong. The way I understand it is you still have to declare yourself as self-employed and then fill in your tax return when required, even though you're still employed by someone else. You simply declare your earnings and your expenditures (your laptop) and the tax is calculated for you. You then get a bill which you pay based on your earnings.

    Like I say, I'm no expert. I'm self employed but I don't have an employer as well so I'm not in the same situation as you.

    I'd just be honest and ask your client though. You've got an accountant right in front of you who can set you straight AND help you keep as much of your earnings as possible.

    Never be afraid to ask for help, especially since you're just starting out. They've come to you for help with their design, you go to them for help with your finances. That's business :D
     
  3. DAVOR

    DAVOR Member

    My understanding is the same as you have outlined Offelias, it is something I need to get around to doing and quickly.

    I agree with Paul, you have an accountant sitting in front of you, just ask them.
     
  4. Dave L

    Dave L Well-Known Member

    Paul's answer sounds about right. As you're trying to make a proper go of things, I'd certainly get the accountant on board (perhaps on a skill swap?) - with good advice, you'll end up keeping more of your money in the long run.
     
  5. Offelias

    Offelias Member

    Just to clarify, if I were to declare myself as self employed - would tax then cease to come out of my monthly PAYE requiring me to pay in a separate (not out of PAYE) way after filling a self assessment?
    I think I may offer two additional designs free of charge for a trade off in some income tax advise :)

    Davor - let me know how you get on! I'll also keep you posted when I get some clarification.

    It's quite strange having to do this with this being the only freelance job I currently have. Hopefully of course I will get some more work in.
    Though whether it's one job or 5, 2k is a substantial amount of money equal to four months work at my current job.
    I'd hate to get caught out over not being professional, and it means that I'll know what I'm doing regarding correct finance/bookkeeping etc when I have a greater client base.

    All good fun!

    Thank you all for your replies xx
     
  6. Dave L

    Dave L Well-Known Member

    PAYE arrangements for your first employment would be unchanged - you'd just declare your second employment when you complete your self-assessment. If I remember right, I think modest earnings from freelancing wouldn't attract NI as that's taken care of through your regular job. Best thing to do is phone your local tax office, explain the situation and see what they say - in my experience, they're very helpful and won't get you involved in anything unnecessarily.
     
    Eagle likes this.
  7. Offelias

    Offelias Member

    Thanks Dave L,

    I agree, ringing them would give me the best information.

    Thanks,
    Oph
     
  8. hannah89

    hannah89 New Member

    I agree with Dave, give them a call. My partner was in a similar position a few months ago when his freelance work picked up and heard so many different versions when he asked people what to do that he ended up calling and they were very helpful. At the end of the day, if you follow what they say, they cannot question it later on, whereas listening to other peoples interpretations could leave room for error. If its going to be larger sums of money too, its just not worth the risk. Start as you mean to go on! and good luck :)
     

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