I read these pages on gov.uk:
And I understand that there are two types of income allowances:
- The Personal Allowance, which has different tax bands, i.e. first £12,500 is tax-free, then it's 20% and so on
- 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?