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Advice for son - Additional earnings - Tax and NI

Practical Issues
ReformedCharacter
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Advice for son - Additional earnings - Tax and NI

#330819

Postby ReformedCharacter » August 4th, 2020, 11:56 am

I'd really appreciate some pointers on behalf of my son who has asked me for some help.

Son is employed and a basic rate taxpayer. He also works from time to time for companies both in the UK and abroad who just send him a cheque or money transfer. These additional earnings are not particularly significant, so far this year they amount to about £5k.

I assume he'll need to complete the relevant section of the SA form about additional earnings and pay the tax due after allowable expenses, which in his case would be for computer equipment - he works as a games designer. I hope my understanding is correct thus far. But I'm less sure about how NI, how the extra NI is calculated and paid. Any pointers would be gratefully received.

TIA

RC

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Re: Advice for son - Additional earnings - Tax and NI

#330828

Postby bluedonkey » August 4th, 2020, 12:18 pm

You/your son would be best advised to have a meeting with an accountant. The open question is whether he is self employed. Given (i)the £5k is not a trivial amount, (ii)sounds like it is ongoing and (iii)that money appears to be from more than one source: the odds are that he is self employed. Most accountants will have an initial meeting on a no obligation basis.

PinkDalek
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Re: Advice for son - Additional earnings - Tax and NI

#330831

Postby PinkDalek » August 4th, 2020, 12:27 pm

ReformedCharacter wrote:[I assume he'll need to complete the relevant section of the SA form about additional earnings and pay the tax due after allowable expenses, ...


It looks like he may need to Set up as self-employed (a 'sole trader'), see https://www.gov.uk/working-for-yourself for starters, which includes You can be both employed and self-employed at the same time, for example if you work for an employer during the day and run your own business in the evenings..

That leads to https://www.gov.uk/set-up-sole-trader which would involve him Registering for Self Assessment To set up as a sole trader, you need to tell HMRC that you pay tax through Self Assessment. You’ll need to file a tax return every year.

Register for Self Assessment.
https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed.

I'm not sure which form you mean by SA form about additional earnings unless you are thinking of Additional information https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/872522/SA101_English_Form.pdf which I don't think fits the bill.

Perhaps the following from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874084/SA150_English_Notes.pdf is what you mean:

Other UK income not included on supplementary pages

Box 17 Other taxable income

This includes:

• miscellaneous income from casual earnings, commission or freelance income (not exempted by the trading income allowance)


Yet that is followed with:

Receipts from self-employment (read page TRG 2 of these notes) and certain miscellaneous income of £1,000 or less are exempt from tax and do not need to be reported on a tax return. If the total receipts from both are more than £1,000, the ‘Self-employment’ pages must be completed to report the self-employment income and the miscellaneous income must be reported in Box 17.

The Self-employment (short) form is here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874368/SA103s_-_English_Form.pdf

Not sure I've really answered your questions and no doubt others can expand on the benefits/disadvantages of registering for self employment. Nor have I touched upon allowable expenditure.

I've now seen bluedonkey's sensible advice.

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Re: Advice for son - Additional earnings - Tax and NI

#330834

Postby PinkDalek » August 4th, 2020, 12:30 pm

ReformedCharacter wrote:[But I'm less sure about how NI, how the extra NI is calculated and paid. Any pointers would be gratefully received.


Self-employed National Insurance rates
https://www.gov.uk/self-employed-national-insurance-rates

Edit: From there you'll get to a brief overview of:

Expenses if you're self-employed
https://www.gov.uk/expenses-if-youre-self-employed

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Re: Advice for son - Additional earnings - Tax and NI

#331426

Postby ReformedCharacter » August 6th, 2020, 6:13 pm

My son asked me to thank you for your help, so thank you PinkDalek and bluedonkey, much appreciated. BTW, he's decided to use the services of an accountant, being very busy he'll doubtless be better off using his time for paid work rather than grappling with the HMRC.

RC

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Re: Advice for son - Additional earnings - Tax and NI

#331434

Postby bluedonkey » August 6th, 2020, 6:56 pm

ReformedCharacter wrote:My son asked me to thank you for your help, so thank you PinkDalek and bluedonkey, much appreciated. BTW, he's decided to use the services of an accountant, being very busy he'll doubtless be better off using his time for paid work rather than grappling with the HMRC.

RC

I would recommend the following approach when selecting an accountant:

- A small firm, even a one man band, will be most suited to his needs.

- Ensure the accountant is regulated by an accountancy body, such as ICAEW or ACCA. This will ensure there is some sort of regulation of the accountant including the requirement that they have professional indemnity insurance.

- Be prepared to speak to more than one accountant. Most people's idea of fun doesn't including speaking to lots of accountants but it will help to get a feel for what will work for you. Good communication is important. The technical side of your son's situation is pretty straightforward for most accountants to deal with, so communication and responsiveness is key.

- Ask to meet the person who will actually be doing the work (we're back to the one man band point above).

- Ask what the target time for turning round the work is, e.g. 2 weeks after they receive it (good), 4 weeks (ok), etc, or do they just work to the statutory deadline of 31st January (bad) or no target time at all?

- I'd advise against using "pile it high / sell it cheap" online outfits. These are sausage machine factories where work is delegated down as far as possible to very junior staff.

Finally, don't be the client that always leaves sending stuff to the accountant until the last minute. Apart from it just not being sensible, some firms are starting to charge a premium for last minute work.

Good luck!


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