What Are The Tax Implications Of Working Freelance?

We all love the prospect of being able to work for ourselves and manage our own hours. But when it comes to working in a freelance capacity how will this affect your tax responsibilities?

What does freelancing mean?

Freelancing essentially allows you to offer your specialism (design, copywriting, book keeping etc) on your own terms and bid for the projects you want to work on.

Similarly freelancing allows you to decide your own rates – although these should be based on your experience and current market trends – so you can control your own income.

However like all forms of self-employment, being your own boss and working your own hours, doesn’t mean you’ll be exempt from tax at efile time.

What are my tax implications as a freelancer?

The answer to this question will partly depend on whether this freelancing role is your only job or if you are freelancing on top of your currant job.

If it is the latter then you will have to do the following:

  • Declare your self-employed income to the HMRC and fill in the ‘other income’ section of a self assessment form.
  • As you are considered employed and self employed you will have to disclose your employed income and the Income Tax and National Insurances contributions you paid so the HMRC can determine what additional Income Tax you owe as well as ask for Class 4 NIC.

If on the other hand, you plan to make freelancing your only job, then you will have to do the following:

  • Declare your self-employed status to the HMRC who can assign you a login and password so you can complete a self assessment form online.
  • At the end of each tax year you will have to complete a self assessment form detailing all the income you have made. The HMRC will then use this information and details of your personal allowance to decide what Income Tax you have to pay. TIP: keep a detailed record of all your ingoing’s (invoices) and outgoing’s (receipts for travelling for a job) so you can identify if you are eligible for relief.
  • As you are self employed you will automatically have to pay Class 4 NIC.

NOTE: if you earn more than £77,000 in a year you will have to register for and pay VAT.

Making the decision to become self-employed, doesn’t have to be difficult once you know what your tax responsibilities are. However if the prospect of filling in self assessment forms; meeting deadlines and handling your own taxes worries you, then enlisting the help of a chartered accountant can take the pressure off your shoulders.

With their support, accountants can help you to complete and fill in your self assessment on time; apply for tax reliefs on your behalf; ensure you are not paying too much on your taxes and most importantly they can free up your time so you can focus on what you do best – your job!

So if you would like to take the weight off your shoulders, why not consider employing an accountant. With their help your shoulders will soon feel light and carefree.

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