2

I read these pages on gov.uk:

And I understand that there are two types of income allowances:

  1. The Personal Allowance, which has different tax bands, i.e. first £12,500 is tax-free, then it's 20% and so on
  2. The first £1,000 from self-employment, like freelancing or contracting

Does this mean that if I earned £20,000 as an employee and £1,000 as a freelancer, I only pay this amount of tax?

  • (£20,000 - £12,500) * 0.2 = £1,500

I know that employers automate this process for employees through PAYE, so I only want to make sure that I, as a freelancer, don't have to pay tax on that £1,000?

1
  • 1
    The £1,000 self-employed trading allowance is no use to most self-employed people, because you can only claim it instead of deducting your actual expenses from your income. Most people have expenses of more than £1,000. – Mike Scott Feb 9 '20 at 18:33
0

Yes. The allowances are separate.

Your employment income would be taxed via PAYE, and then you’d complete a self assessment tax return and declare your use of the allowance up to £1000 (the amount of allowance used cannot exceed your income from self employment). If your expenses are higher than £1,000, you will not claim this allowance and would instead declare your final expenses.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.