18/10/2021Payroll & PAYE , Sole Trader , Taxation
If you’re looking for a way to increase your income while still working full-time, you might be thinking if you can be self-employed and employed at the same time. The short answer is a resounding yes! If you’ve already had a full-time job while running your own business, you’re probably aware of the liabilities that come with it.
Therefore, if you have never been through this situation, then read this blog till the end! We will inform you about its advantages, the tax to pay with, and its further details. So, let’s start!
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Can I be Self-employed and Employed at the Same Time?
Yes, you can. For instance, you work for an employer/company throughout the day, but in the evenings or at night, you work for your own business.
When you run your own business and are solely responsible for its success or failure, you are considered self-employed. On the other hand, you are an employee or employed when you work for an employer on their own payroll and you are paid through it.
If you fall under both categories, you are both self-employed and employed at the same time. The money you earn from your job will be taxed under Pay As You Earn, and you’ll need to file a Self-Assessment Tax Return to declare the income you made from your own business.
Advantages of Being Self-employed and Employed
The advantages are valuable, although they are simple. One of the main reasons is taxation. Several employment ways and forms of income are taxed differently. So, by taking advantage of your possibilities, you can save your money.
Moreover, having your own business while working for someone else can be a great source of prosperity and mental satisfaction that you will not find anywhere else.
How Does Tax Work If You are Self-employed and Employed?
The income tax and NI (national insurance) implications can be complicated in case you are self-employed and working for another employer at the same time or are changing from self-employed to employed or vice versa.
You have to inform HM Revenue & Customs immediately as you become self-employed even if you are also working for someone else at the same time or you have already completed a tax return every tax year. You should not inform them late (when filing a tax return).
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After registering, every year, you will be required to complete a tax return. You will enter your self-employment earnings as well as any allowable expenditure incurred details in the tax return. This will permit HMRC to calculate the amount of your income tax and NI you must pay. If you have file your tax return you must pay the tax amount at the end of the tax year.
Am I Exempt from PAYE If I’m Self-Employed
You are exempt from PAYE if the following case applies to you:
- You are doing business for yourself and are liable for its success and failure and you can make a profit or a loss of your business.
- You can control what work you do, when, how, and where you do it.
- You can outsource the work to anybody else.
- Your employer agrees to a fixed commission for your work.
- You utilise your amount of money to purchase business things, cover operating expenses, and provide equipment and tools for your own work or the work of the employees you hire.
In case you are a self-employed person, you must fill self-assessment tax return form once every year. Also, you have to pay HM Revenue & Customs twice a year ( in January and July). In some cases, you can pay just via PAYE. It means that your taxes will be automatically paid through it and there will be no risk of not meeting a deadline.
To use PAYE, You must submit your tax return by October, 31st (manually). You can also submit it online by December, 30th.
HM Revenue & Customs will collect the money automatically you owe via PAYE, in case you meet the conditions mentioned above; otherwise, pay through instalments.
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What is a Self-Assessment Tax Return?
If you are self-employed and do not pay income tax through Pay As You Earn, you must register for Self-Assessment. After the end of a tax year (5 April), self-employed businesses and individuals must file a Self-Assessment tax return to record their earnings.
To fill out and submit your returns, you only need to keep track of your receipts and bank statements. HM Revenue & Customs will assess what you have to pay on the information you’ve provided. By the 31st of January, you have to pay your Self-Assessment bill. In addition, the amount of tax you are required to pay is based on your income tax band.
You have to send a self-assessment tax return in case:
- You’re self-employed with a profit of over £1,000
- You are a partner in a partnership
Remember that submitting your tax return up to three months late will result in a £100 penalty. You will pay more if it is late for more than three months.
Final Thoughts
To summarise the discussion, we can say that you can be self-employed and employed at the same time, which has many simple but valuable advantages. However, you should be aware, that there are tax implications with this. PAYE is a system that deducts income tax and NICs from employees. But as a self-employed, you must pay tax and NI through Self-Assessment.
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Disclaimer: This blog contains general information on employment.
