Employed and self-employed at the same time

[Dannydee]

Hi,

I am employed full-time in Northern Ireland. I've recently taken a part-time freelance job with a US-based company, that I'll be doing on the side, anything from 10 to 20 hours a week (with no limit).

I've been doing research on how the best way to receive and declare this income will be. My home address is a registered business address with me as the director (not trading and never has been, It was registered for a failed online business attempt I made 2 years ago but the company is still technically active).

I think that for me to receive this income into my business bank account, the contract with the US company must be between them and my company. Is that correct? Is it wise to have this money paid into my business account either way?

What if I was to receive the payment from the US company into my personal current account? In my main employment, tax is taken through PAYE. If I'm doing self-assessment, and let's say my total income from employment and self-employment remains less than 50k, surely I don't need to pay further tax, when my PAYE contributions have already covered it?

 

[wayzgoose]

Your PAYE contributions cover what you owe through your employed work. You will have to pay full tax on your self employed income as all your personal allowance will have been used.
Nice thought, but your "PAYE contributions have NOT already covered it"

 

[Dannydee]

Your PAYE contributions cover what you owe through your employed work. You will have to pay full tax on your self employed income as all your personal allowance will have been used.
Nice thought, but your "PAYE contributions have NOT already covered it"

On reflection, I never thought my question through properly. It was the personal allowance I was thinking of. Obviously, anything above that, and up to 50k, should be taxed at 20%.

I'd like to find out more about doing this through my registered Ltd company, though. It's unlikely this will be my only source of freelance work and it would probably make more sense to receive this kind of income through that, and through my business bank account.

 

[MyAccountantOnline]

...
I think that for me to receive this income into my business bank account, the contract with the US company must be between them and my company. Is that correct? Is it wise to have this money paid into my business account either way?

...

If you want to trade via a limited company then yes the contract must be with the US company and your limited company.

When you say 'your' business bank account I assume you mean the limited company bank account. The company needs a bank account in its name, not yours.

 

[Dannydee]

If you want to trade via a limited company then yes the contract must be with the US company and your limited company.

When you say 'your' business bank account I assume you mean the limited company bank account. The company needs a bank account in its name, not yours.

The business bank account is in the company name, yes.

I think I'm going to do this as self-employed initially, being paid into my personal current account, so I can gain experience in these areas of business I've not yet ventured into.

 

[Spur Support Services]

Hi Danny
The tax position is best considered across both activities in a level of detail that may not be appropriate for a forum, but perhaps here are some pointers.

For example, considering your "£50k" employment income, have you got children? How close to the earning threshold are you and will your additional income effect that position?

Also, do you need the cash, or could you use the second income to invest in a pension or leave the cash in the company.
If you did feed the income through a company, yes there would be Payroll if you extracted a salary and as a second job, HMRC would set a tax code to collect tax on that pay. Software like Xero Payroll makes this fairly easy, as it liaises with HMRC direct to undertake tax calculations, submissions and coding updates. As noted above if a Company is used then think of it as a separate living entity that uses your services, but if you are a non-contractual director then you don't have to pay minimum wage.

Finally, do you actually have a choice in whether you use a company or self employed status.
Will the US company insist on using the Company?

If you do need a business bank account then I well recommend Tide and you get 12 months with no transaction fees if you use Partner Code SPURSUPPORT when opening the account. Tide actually have a £50 cashback deal on at the moment too, when you use their facility to register a limited company free of charge and fund the bank account prior to 30 June 2021 (pay in the value of the alloted shares).

 

[Dannydee]

Hi Danny
The tax position is best considered across both activities in a level of detail that may not be appropriate for a forum, but perhaps here are some pointers.

For example, considering your "£50k" employment income, have you got children? How close to the earning threshold are you and will your additional income effect that position?

Also, do you need the cash, or could you use the second income to invest in a pension or leave the cash in the company.
If you did feed the income through a company, yes there would be Payroll if you extracted a salary and as a second job, HMRC would set a tax code to collect tax on that pay. Software like Xero Payroll makes this fairly easy, as it liaises with HMRC direct to undertake tax calculations, submissions and coding updates. As noted above if a Company is used then think of it as a separate living entity that uses your services, but if you are a non-contractual director then you don't have to pay minimum wage.

Finally, do you actually have a choice in whether you use a company or self employed status.
Will the US company insist on using the Company?

If you do need a business bank account then I well recommend Tide and you get 12 months with no transaction fees if you use Partner Code SPURSUPPORT when opening the account. Tide actually have a £50 cashback deal on at the moment too, when you use their facility to register a limited company free of charge and fund the bank account prior to 30 June 2021 (pay in the value of the alloted shares).

Thank you for the detailed response.

The US company don't require me to have a Ltd company, but told me I can invoice them as the company if I wish.

I'm only touching half the 50k. So the additional income would hopefully get me closer. This is unlikely to happen in year one but I'd hope to reach it in year two.

I think I'm going to do it as self-employed, at least initially. There's no point making it more complicated than it needs to be, until I gain experience in these financial areas.

Does it matter which personal current account I use to receive payment from the US company? I have two. One is my main one and the other is one I use to store savings (but it's not an actual savings account).

Ps. I simply want to increase my income. And yes, perhaps at some point, look at investment in something like a pension, because I don't have one now (although I absolutely despise that word, it's so depressing).

 

[Paul Kelly ICHYB]

@Dannydee have you posted this question elsewhere e.g. FB groups?

 

[Spur Support Services]

Thank you for the detailed response.

Does it matter which personal current account I use to receive payment from the US company? I have two. One is my main one and the other is one I use to store savings (but it's not an actual savings account).

Ps. I simply want to increase my income. And yes, perhaps at some point, look at investment in something like a pension, because I don't have one now (although I absolutely despise that word, it's so depressing).

You should really have a business account for business income and expenses. This also segregates the from your normal living expenses and simplifies accounting.

Re pension... It's never too early to start contributing, as the words "state pension" are meaning less and less as the years go by. Better to plan for a retirement earlier than the state pension age!
Ensure your employer has enrolled you in their auto-enrolment scheme and enquire how you can make additional contributions to that scheme as and when appropriate in the future.

 

[Dannydee]

You should really have a business account for business income and expenses. This also segregates the from your normal living expenses and simplifies accounting.

I do have a business account but it just seems like more of a headache than I can handle right now, having to pay myself out of it and then also tax that income etc etc. I think I'm happy to do it the easier way of paying it into one of my current accounts and declare it as additional self-employed income, at least for now (which of my current accounts?).

I know I could technically use my company name as a freelance business but I'll get some experience of freelancing first.

Re pension... It's never too early to start contributing, as the words "state pension" are meaning less and less as the years go by. Better to plan for a retirement earlier than the state pension age!
Ensure your employer has enrolled you in their auto-enrolment scheme and enquire how you can make additional contributions to that scheme as and when appropriate in the future.

My employer did auto-enroll me, and I opted out. Have done for 6 years (I've never paid anything into a pension). Again, the word utterly depresses me and the idea of getting all excited about saving for your out-of-prime years when you're in your 20s and 30s gives me the shivers.

I don't plan to rely on a state pension. The way I see it is, I have 30 years to create my own capital.

 

[Spreadsheet Accountant]

You could explore an HMRC DPNI paye self operated scheme; they still exist far as I know.
Keeps matters very simple.