Employed and Self Employed

[DesertRose]

Hello, new poster

I currently work for a company as an employee. I am also about to start a business in my spare time, as a sole trader. How does this work for income tax purposes? I pay tax PAYE as an employee, so will it simply be the case that when I fill out a return after my first year of trading as a sole trader, I will pay tax on the profit at the same rate as I do PAYE? (The income from both won't take me out of the lower band). And what would be the case for NI and my sole trader activities, given that I'm also employed? These are questions, the answers to which I'd like to be able to understand myself, in the first instance, rather than handing all of this type of thing over to an accountant. My business will be operating on such a small scale in the immediate future that I would like to maintain as much control over it as possible. Thanks

 

[StevensOnln1]

For income tax, all your income is added together, your personal allowance is deducted then you pay 20% income tax on the rest (until you reach the threshold for higher rate tax). As income tax on your employment income is deducted at source, you'll only have the tax due for your self employment income to pay when you file your tax return.

National Insurance is calculated separately for each job you have and worked out differently for self employment income. For self employment you pay Class 2 NI (currently £2.65 per week) unless your profits are below around £5,500 when you can claim exemption. You also pay Class 4 NI (currently 9%) if your profits are above around £7,500.

 

[DesertRose]

Thank you, StevensOnln1!!