Tax on irregular freelance work

Question

February 2015. I currently have a pension of over £21K per annum but recently was asked to do freelance copy editing work for a publisher. Some three months later they have paid in full £3,267. This was the first work I had done since I retired in 2011.

I've been looking at the HMRC website but unable to find assistance of how to pay the tax on the freelance work.

There may be other freelance work in the future, however this is not guaranteed, so this £3K might be my only payment.

Any advice on paying my tax and whether I should restart a company, bearing in mind there may not be future work for me?

Answer 1

You need to register as self-employed.

As a result of this you will automatically be asked to complete a self-assessment tax return in April, and each subsequent April until you tell HMRC you've ceased self-employment.

You may also be liable to pay National Insurance if you've retired early and are still under the state pension age. There are 2 classes of NI applicable to the self-employed, classes 2 & 4. Class is percentage based and only paid on profits over a threshold (currently just under £8000/annum so well above the sums you're looking at).

Class 2 is a flat rate, currently £2.75/week. You can claim an exemption if you expect to make less than £5885/annum but it can be worth paying voluntarily since it counts towards your eventual state pension entitlement.

For such relatively small sums it's probably not worth setting up a company - you're not really going to see a benefit in tax savings and you'll have the extra admin overhead and potentially some costs associated with running the company.