A lot of people like the idea of being their own boss, but don’t want to risk being self-employed as their only source of income. That’s how a lot of small businesses get their start, as second jobs for people who wok on the books elsewhere. This can be a great idea if you’re cut out for it, but you do need to keep your tax situation under control.
When you’re self-employed, even as a second job, you’ll need to get cosy with the taxman. That means registering yourself with HMRC as self-employed, getting set up for the Self Assessment system and filing yearly tax returns to report all your earnings, expenses and other key details.
Self Assessment comes with some specific dates and deadlines to hit, the most important of which is the 31st of January. Every year, this will be your deadline for filing your tax return paperwork, along with paying up what you owe.
Guide to UK Tax Returns
The other thing to know before setting yourself up as self-employed is that your National Insurance Contributions (NICs) wont’ magically take care of themselves any more either. You’ll have to pay what you owe for these when you settle up with the taxman each year.
The basic paperwork for your self-employed job will be a little different from your on-the-books work, too. You won’t have a regular payslip sent to you, for one thing. That means you’ll have to keep a tight set of records covering all the money flowing into and out of your business. Self Assessment tax returns are a huge topic in themselves, so make sure you have a good understanding of what’s involved before diving in.
So, are you an on-the-books employee with a self-employed side gig or a small business owner who moonlights PAYE for someone else? Generally, it’s probably best to class your “main job” as the one that brings in the most money. Either way, you’ll be paying a year in arrears for your self-employed work. That means, for example, that the profits your self-employed business made in 2021/22 will factor into the eventual tax bill you’ll pay up by the 31st of January 2023. This is something that trips up a lot of people when they’re new to Self Assessment. Instead of the tax trickling out of your pay each month through the PAYE system, your self-employment tax for the entire year will all fall due in a big lump. Tax years run from the 6th of April to the 5th of the following April, though, so you’ll know 9 months ahead what you’ll have to cough up.
Important financial dates & deadlines