PAYE and self employed

[Trustno1]

Hi guys

Need help! I’m currently employed PAYE.

I’m a Plumbing & Heating engineer.

Looking at going self employed at the same time to do in evenings and weekends. Got reliable sub-contracting work available.

My current employed salary with overtime/callout is around £40,000-£43,000 per year

My self employed Salary I’m estimating to be around £9,000-£12,000 per year

Combined between £49,000-£52,000 approx

I’m setting up as sole trader, but what do I need to do regarding tax/national insurance etc? Is it simple as phoning tax office and informing what my plans are? How soon do I have to do this?

Going by the figures above would you suggest putting 30% off my self employed earnings to cover the tax bill?

Any other advice on how to keep good book keeping?

Thanks again

 

[CriticalThinker]

You'll need to register for self assessment; I'm assuming as being PAYE currently you are not currently registered for any other reasons. You can register for SA online at .gov website. You should tell/register with HMRC as soon as you start your self employment however the deadline is the 5 October after the end of the tax year for which you need to file a return i.e. 5 October 2019 if you need to file a return for tax year ending 5th April 2019.

You'll pay income tax on your tax adjusted profits and also need to pay Class 2 and Class 4 National Insurance over certain thresholds; looking at estimated profits it would be likely you'll pay both.

As for good book keeping, it's simple advice...keep your invoices and receipts and use a basic excel cashbook to record income and expenditure. You won't need anything more complicated than that as you can use the cash basis for your end of year accounts for the purposes of calculating tax liabilities and it's a small secondary income so should be relatively easy to keep a track of.

Hope that helps!

 

[Trustno1]

You'll need to register for self assessment; I'm assuming as being PAYE currently you are not currently registered for any other reasons. You can register for SA online at .gov website. You should tell/register with HMRC as soon as you start your self employment however the deadline is the 5 October after the end of the tax year for which you need to file a return i.e. 5 October 2019 if you need to file a return for tax year ending 5th April 2019.

You'll pay income tax on your tax adjusted profits and also need to pay Class 2 and Class 4 National Insurance over certain thresholds; looking at estimated profits it would be likely you'll pay both.

As for good book keeping, it's simple advice...keep your invoices and receipts and use a basic excel cashbook to record income and expenditure. You won't need anything more complicated than that as you can use the cash basis for your end of year accounts for the purposes of calculating tax liabilities and it's a small secondary income so should be relatively easy to keep a track of.

Hope that helps!

Hi thanks for your reply. Some helpful information.

Regarding tax, NI, is there a precentage I should be putting away from second income to cover the bills at self assessment i.e 30% from every £1,000 I make. Don’t want to have a horrible bill at the end of each year and want to be sure I put enough away to cover it

 

[CriticalThinker]

Based on your above stated figures 30% would cover the tax liability and be a sensible proportion of income to put away.

Note that the tax due for the SA would be due on the 31st January following the end of the tax year i.e. tax year ending 5th April 2018 is due by 31st January 2019. This gives you a period of time to put aside money to pay any tax due if there 30% of income doesn't cover it. This excludes any POAs which you should avoid as more than 80% of your earnings are through PAYE (based on £40k salary & £9k self employed).

Best advice is do your tax return early so you know what you have to pay well in advance of the 31st January!

 

[SteveHa]

At your expected income level, some of your income will be taxable at the higher rate of 40%. Assuming that your estimate of £9k - £12k PA from self-employment is the taxable net, then you would be advised to save around 45%, which will cover the tax and Class 4 NI (probably with a bit of change).

 

[Newchodge]

I believe you will come under CIS, so you would need to register as a CIS sub-contractor as well. It means that 20% of your charge (excluding materialas) will be paid to HMRC twards your tax bill by the contractor.

Have a look at CIS rules here https://www.gov.uk/government/publications/construction-industry-scheme-cis-340

 

[Gecko001]

Note there could be a clause in your employment contract requiring you to tell your employer of your self-employment. This clause in the contract is usually there to prevent employees taking work away the employer by say working for a competitor, but it can be there to ensure that you do not come to work tired which has repercussions on your efficiency and increased risk to safety of you and others on site.

 

[Trustno1]

Note there could be a clause in your employment contract requiring you to tell your employer of your self-employment. This clause in the contract is usually there to prevent employees taking work away the employer by say working for a competitor, but it can be there to ensure that you do not come to work tired which has repercussions on your efficiency and increased risk to safety of you and others on site.

Thanks already checked this and no issues, plus there is no competition.

 

[Trustno1]

Thanks everyone, a bit more reading to do.