5

I have spent the past few evenings trying to work out what is the correct thing to do with regards to taxation in the UK for my set of circumstances.

9-5 I work for a company and am on PAYE.

5-9 I run websites that generate enough income that I want to declare to the tax man.

The amount I make does not exceed the amount my 9-5 generates, but it isn't pocket change either.

I am getting mixed messages from my reading the HM Revenue and Customs site and my research elsewhere has proven to be pretty fruitless. Some articles seem to suggest that I should complete self assessment, others state I should register as self-employeed and follow the tasks outlined within it.

Some people I have spoken to say it is enough to send them a letter explaining what you have made over the past while and to ask their advice.

Any help would be greatly appreciated.

  • I would see an accountant - they will be able to advise you on the most tax efficient way to do this. It very much depends on how much you're earning. – Anonymous Apr 14 '12 at 7:50
  • If you registed as sole trader for example you PAYE code will change at your current employer, and they will be suspicious. If they know you do this, then OK, if not, questions could be asked. Another way is to go Limited. As the company will pay corporation TAX and you can claim dividends without taking a salary (so your PAYE will not change) but you have to ensure your profit is constant in LTD. Then you have to file a self assessment and declare the dividends, which, I if i understand are TAX free because your LTD already paid corporation TAX on them.You can also offset expenses against LTD – WillyWonka Apr 1 '14 at 19:28
3

As 'anonymous' already mentioned, I think the correct answer is to go see an accountant.

That said, if you are already have to fill in a tax return anyway (ie, you're already a high rate taxpayer) then I don't see why it should be an issue if you just told HMRC of your additional profit via your tax return.

I never was in the situation of being employed with a side business in the UK, only either/or, but my understanding is that registering as self employed is probably more suitable for someone who doesn't PAYE already. I might be wrong on this as I haven't lived in the UK for a couple of years but an accountant would know the answer.

Of course in either case, make sure that you keep each an every scrap of paper to do with your side business.

0

Being self employed just means you fill out some more forms in your annual self assessment for your "profit" from being self employed.

Profit = all the money you receive, minus any tax deductible cost that you spent for making that money (and all the cost must be documented, which means you have a folder with all the receipts and keep it safe). You pay normal income tax on all the profit, which means it is just added to your taxable income. What you do with the profit is up to you; you don't pay yourself a salary, just take the money (make sure you leave enough to pay your taxes).

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