If you’re a creative soul, but like the safety of a regular income from your full-time or part-time job, we’re here to tell you it doesn’t have to be a “one or the other” situation.
Whether you’re a graphic designer helping a local coffee shop reinvent their menus, or a photographer travelling to a different wedding each weekend, freelance work is a great way to earn an extra bit of income or build your portfolio.
At Raedan, we’ve been in this industry for decades, yet we’re still hearing people ask “do I pay tax on freelance income if I already have a job?”
Basically, yes.
But, the amount you need to pay and how you report it depends on your circumstances.
Here’s what you need to know about tax on a second job in the UK.
Is freelance income taxed if I already have a job?
Yes, if you earn money from any freelance job on top of your salary, your freelance income might be subject to Income Tax.
Normally, your employment income is taxed through PAYE, and your employer is responsible for deducting tax from your wages. This is different for freelance income. If you’re working for yourself, you’re responsible for keeping on top of your income and expenses. This includes reporting to HMRC.
(We know how much you love those guys)
This means having a job doesn’t give you a separate tax-free allowance for your freelance work.
But don’t worry, your total taxable income is taken into account when working out how much Income Tax you owe.
How does tax on a second job work?
It’s important to distinguish between having a second job as an employee and doing freelance work.
If you have two PAYE jobs, both employers will usually take the tax off of your pay. HMRC will split your two jobs between two tax codes and then use these to work out how much tax you need to pay.
When you freelance, you’ll normally need to do the maths yourself.
For creatives, this means considering income from:
- Freelance design projects
- Photography and videography
- Writing and editing
- Illustration and artwork
- Consulting or creative services
- Selling creative services directly to clients
Keeping your earnings and expenses organised is the key to making sure you can easily calculate your overall income and what you owe when the time comes.
What is freelance tax in the UK?
There isn’t a special “freelance tax” rate in the UK. Instead, freelancers may have to pay Income Tax on their taxable profits, alongside any tax due on their employment income.
You may also need to pay National Insurance, depending on your circumstances and the level of your self-employed profits.
The amount you owe will depend on the tax bracket you fit into, and this is based on your income.
Do I need to register as self-employed?
You don’t need to register as self-employed right away.
If you earn a small amount from freelance work, the trading allowance means that for the first £1000 you earn relates to gross trading income, not your profit after expenses.
As your income grows, you should check HMRC’s current guidance to establish whether you need to register as a sole trader and complete the very exciting Self Assessment tax return (yippee!).
Don’t forget about freelance expenses
One mistake we see again and again is freelancers thinking they will get taxed on all of their total freelance income.
If you’re self-employed, remember you can deduct business expenses before working out your taxable income.
Depending on your sector, you can claim back on:
- Software and subscriptions
- Business insurance
- Professional fees
- Equipment used for your business
- Marketing and advertising
- Certain travel expenses
- Office costs
Now, being organised is our job, but the rules can be very specific over what does and doesn’t count, so make sure you are keeping records and receipts instead of guessing what expenses are automatically deductible.
How should creatives prepare for their tax bill?
If you have a main job and are freelancing on the side, it can be tempting to spend your freelance income as soon as it lands in your pocket. But, setting money aside for tax on your second job can make your Self Assessment bill much less scary.
Why not keep a separate account for your freelance income, so that you can see exactly how much you’ve earned from this alone?
You should also keep accurate records of your invoices, income and business expenses. Good bookkeeping doesn’t just make tax returns easier, it can help you understand whether your freelance work is actually profitable, too.
Getting your freelance tax in the UK right
Combining employment with freelance work can be a great way to develop your skills, but it does come with responsibility.
If you’re unsure about tax on a second job, or how freelance tax in the UK works, it’s always worth getting in touch – don’t wait until the Self Assessment deadline.
That way, you can focus on what you actually enjoy, and grow your creative business.
To get in touch, phone us on 0203 617 9176 or get started here.
