Consultancy work, while in full-time employment

[SuzyS]

Hi,
I currently work full-time for my employer.
I want to do some consultancy work for someone, for a relatively small amount of money, and want to do things properly.
Unfortunately I'm a bit confused about the whole area of tax and NI and am not clear on what I should do.
Would anyone be able to advise me on what forms I need to fill in and what else I should do in order to proceed?

Many thanks,
Suzy

 

[Calibre Designs]

Hi Suzy,

I do believe there is a threshold before you have to pay additional tax/ni.
Register with the local tax office and they will be able to guide you.
Just checking - no conflict of interest with your potential client and your employer?

Kay

 

[elaine@cheapaccounting]

The threshold (personal allowance) will likely be used in your current employment.

Anyway you must tell HMRC within 3 months of starting self employment. This is the link on who to contact:

http://www.hmrc.gov.uk/startingup/index.htm

Assuming you are going down the sole trader and no Limited company route.

 

[SuzyS]

Many thanks for your speedy answers I'm filling in the Self-employed online registration form now. Would this most likely be all I will need to do initially? I'm assuming it's then up to the HMRC to contact me and send me tax returns and stuff? So I would need to keep a record of what I earn, and keep enough aside to pay the tax?

I am going down the sole trader route by the way and there is no conflict of interest

 

[Astaroth]

They will bill you for NI class 3 (?) through out the year and then the tax return at year end for all the other tax fun

 

[elaine@cheapaccounting]

Suzy

It is your responsbility to make sure you fill in the correct forms etc not HMRC and in fact I had a case earlier this year where a lady (prior to her becoming a client) was fined for not sending in her return on time. HMRC told her that ignorance was no defence (don't shot the messenger )

 

[elaine@cheapaccounting]

They will bill you for NI class 3 (?) through out the year and then the tax return at year end for all the other tax fun

It's class 2 and 4 for self employed - sorry to correct but it is the accountant in me

I have a 3 page article on starting out as self employed which I can send to you Suzy - drop me a line with your mail address if you are interested.

 

[SuzyS]

Thanks Elaine - I will bear that in mind

Unfortunately the online form is not working so I will have to do it on paper!

 

[SuzyS]

I have a 3 page article on starting out as self employed which I can send to you Suzy - drop me a line with your mail address if you are interested.

Thanks I would appreciate that - I'll send you my email address now

 

[Astaroth]

It's class 2 and 4 for self employed - sorry to correct but it is the accountant in me

Not a problem - couldnt remember which is was hence the (?)

 

[INDIZINE]

Just a thought, but if this is a one off or only the one client, you might get away with just declaring it on your annual tax return as 'other earned income'. As far as HMRC is concerned, from what I recall, you are deemed to be running a business when you raise your first invoice to your second customer. ie more than one customer.

The tax office will then calculate the tax you owe on this other earned income, which is on top of though apart form, your employed earnings, if its just a straightforward payment. Whether or not you go over the regular tax threashold, you will be taxed accordingley and be sent your bill to pay which you hopefully have worked it out anyway and have saved up the appropriate amount.

I know someone who has done it this way as she just did some work for the one company and did not have any overheads etc. it was just to provide some evening courses and chareged a flat rate fee to the company for whome she raised a bill. She had no businss, no business bank account, etc etc.

 

[9greej10]

Hi There

This is a very interesting thread as it answers almost everything I was curious about. However (and perhaps due to my naivety) I thought that all I needed to do was register myself with HMRC & complete a tax return form before April not within 3 months of setting out. From what you have said I am now very concerned that HMRC will think that I have been evading tax since May, which is when I did my first consultancy job. I will get onto this asap and get myself registered. Please could someone let me know what is the worst case scenario if they do think I have been evading tax? – which I haven’t but can’t really prove it!!! i.e. fine, criminal record etc? I’ll sure it will be fine if I explain why I haven’t declared any earnings as yet from the consultancy work (not a lot maybe once every couple of months).

Many thanks

 

[SuzyS]

This sounds good, but I am not sure how you get yourselt a tax return without registering as self employed. I don't currently have tax returns to fill in. It will probably be just this one off, with one client so it would make life easier if I could this. Could you (or someone else) let me know how I get into the tax returns system without registering as self-employed?

Just a thought, but if this is a one off or only the one client, you might get away with just declaring it on your annual tax return as 'other earned income'. As far as HMRC is concerned, from what I recall, you are deemed to be running a business when you raise your first invoice to your second customer. ie more than one customer.

The tax office will then calculate the tax you owe on this other earned income, which is on top of though apart form, your employed earnings, if its just a straightforward payment. Whether or not you go over the regular tax threashold, you will be taxed accordingley and be sent your bill to pay which you hopefully have worked it out anyway and have saved up the appropriate amount.

I know someone who has done it this way as she just did some work for the one company and did not have any overheads etc. it was just to provide some evening courses and chareged a flat rate fee to the company for whome she raised a bill. She had no businss, no business bank account, etc etc.

 

[Astaroth]

You would just phone up HMRC and ask for one - there is a fair number of reasons why people that are employed may need to do tax returns and not all automatically trigger the system to send one.

 

[jrjsykes]

Can I ask a question about the consultancy you are undertaking?
Could you be considered an employee of the company 'contracting' you?
The Revenue hate 'consultancy' in somuchas they will think about checking out your badges of trade.. whether you should be employed or not. Form IR56 from the HMRC website will help you and the 'contractor'