A Second job can be an excellent way to earn extra income, pursue your passions, and gain more flexibility. So Having a second job as a freelancer in the UK means taking on additional work outside of your primary employment, often providing services such as writing, graphic design, consulting, or other specialized skills. As a freelancer, you operate as self-employed, meaning you are responsible for managing your own taxes and National Insurance Contributions (NICs). Here’s a guide to understanding the tax responsibilities of a second job or freelance in the UK.
1. Registering as Self-Employed
If you’re freelancing, you must register as self-employed with HM Revenue and Customs (HMRC). This can be done online, and it’s crucial to do it by 5 October following the end of the tax year in which you started freelancing. It is as simple as that, with no further complexities. Please don’t wait for HMRC to knock on your door; they have consequences. Approach them personally and at the right moment.
2. National Insurance Contributions (NICs) On Second Job
As a freelancer, you may need to pay two types of NICs:
- Class 2 NICs: Payable if your profits exceed £6,725 a year (for the 2024/25 tax year). The rate is £3.45 per week.
Purpose: These contributions count towards your entitlement to certain benefits, like the State Pension.
- Class 4 NICs: Payable if your profits exceed £12,570 a year. The rate is 9% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
Purpose: These contributions are based on a percentage of your profits and are calculated on a sliding scale, so the more you earn, the higher the percentage of NICs you pay on the additional income.
Make sure to keep track of your profits and NICs as you go along to ensure you’re meeting your obligations correctly!
3. Income Tax
Income tax is calculated based on your total income from both your primary job and second job work or freelance work. The current tax bands for the 2024/25 tax year are:
- Personal Allowance: £12,570 (tax-free)
- Basic Rate (20%): £12,571 – £50,270
- Higher Rate (40%): £50,271 – £125,140
- Additional Rate (45%): Over £125,140
Your freelance income will be added to your primary job income to determine your total taxable income.
4. Self-Assessment Tax Return
As a freelancer, you’ll need to complete a self-assessment tax return each year. The deadline for online submissions is 31 January following the end of the tax year.
- What You Need to Declare:
- Your total income from freelancing and other sources.Your allowable expenses are related to your freelance work.
- Any other relevant information required by HMRC.
- Calculating the Tax Owed: Based on the information provided, HMRC will calculate the amount of tax you owe. You’ll then need to pay any tax due by 31 January.
It’s important to keep accurate records throughout the year to make the tax return process smoother and ensure you pay the correct amount of tax.
If you need any help filing your self-assessment tax return, our tax professional can assist you. Feel free to reach out for tax expert guidance and support!
5. Tax Codes Overview For Second Job
Your tax code determines how much tax is deducted from your wages. Your second job might have a different tax code, often BR (Basic Rate) or D0 (Higher Rate), reflecting that the Personal Allowance is used by your primary job.
Having the correct tax code is crucial to ensure you don’t overpay or underpay tax. If you have more than one job or additional sources of income, check your tax codes carefully and adjust if needed.
Final thoughts
Freelancing as a second job can be financially rewarding and provide a greater work-life balance. However, it’s important to understand and comply with tax obligations to avoid penalties. By registering as self-employed, keeping accurate records, and understanding your tax liabilities, you can successfully manage your freelance business alongside your primary job. For personalized advice, consider consulting a tax professional who can guide you based on your specific circumstances.