Downsides to registering as a sole trader

Hitby

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Hi all,

I currently work fulltime (PAYE) but I'm considering registering myself as a sole trader in my spare time. I won't be making a set amount of money doing this - just odd bits and pieces for graphic design/web design work.

What is the best way to go about it and how much tax/NI will I pay on my extra earnings? I'm currently in the 20% tax bracket.

I'd appreciate any advice on this and any costs that I will incur that I don't know about :)

Thanks,
Dan
 
I'm just a sole trader but all I did was create a company and register that with HM Revenue. You just have to file a tax return every year for earning from this business. You pay tax on any earnings above I think it's £6,450 a year.

Not sure how NI contributions works I pay currently £9.60 a month for this but I think it's more a minimum this to keep me qualified for NHS, pension etc.
 
You can only "spend" your personal allowance once, so if it's already used up by your PAYE job then you'll pay 20% tax on all of your additional earnings until you breach the 40% bracket with your total earnings (if you're still following me!).

In other words, the tax man will see all of your PAYE income and all of your SE income as one pot of money (plus any other income you have such as investment dividends and interest), on which you can offset your allowable expenses and personal allowances.

So if you earn £10k in your PAYE job and £2k in your SE job and have no other income, then you're liable for tax on (£12k - £6k personal allowance) = £6k very approx. = tax bill of £1,200. Your PAYE will probably take care of the majority of this anyway so you won't have too much extra to find.

As an SE person you'll have to pay class 4 NICs which works out for me at about £9 per month ON TOP of any NICs already deducted through PAYE.

I found the Business Link websites to be very good at explaining these things. :suicide:
 
Would be worth checking your contract of employment as well - mine forbids me from having a second job, approval must be given by them first.
 
Would be worth checking your contract of employment as well - mine forbids me from having a second job, approval must be given by them first.

A good point, where I used to work we had a guy working for us who was selling on the side personal panic alarms to other members of staff in the office :D he didn't last long.
 
thanks for the advice - I think I need to get permission from my current boss but as the work in my own time would indirectly benefit the company I work for I can't see that being a problem :)
 

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