Can someone explain to me how the FREELANCE world work?
What is the amount of tax payment do I need to pay?
How many payments per year do I need to do?
Replies9
- Lots of helpful answers already here but here are some brilliant resources too, if you'd like them:@Nikky Lyle's Guide to going freelance: https://guides.nikkylyle.com/a-fool-proof-guide-to-going-freelanceSarah Townsend's book for freelancers: https://www.sarahtownsendeditorial.co.uk/survival-skills-for-freelancers/And I highly recommend using an accountant if like me you can't even add up! I use Dockwray Accounting - they speak English not numbers, and they have lots of creatives on their books so they understand us!https://dockwrayaccounting.co.uk/
- @Sofia Furió Yes that's correct just once a year. HMRC have a handy calculator that gives you an estimate:https://www.gov.uk/estimate-income-taxHope that helps.
- @Alister Shapley Thank you so much! ANd if I work as a sole trade, do I need to pay only once per year right? Do you know how much ( I know it depends of my salary) but I would like to have an idea because I do not want to receive a surprise. I earn 30k
- @Sofia Furió no, but it is tax deductible as a business expense
- Hi Sofia,You've had some great answer already but I just wanted to add a couple of things. It all depends on how you set up your business. HMRC has some helpful advice on this:https://www.gov.uk/set-up-businessDepending what type of freelance work you want will determine what type of business set up you have and thus what tax payments you make and how you calculate your expenses.If you're working direct with clients (not working for an agency or recuiter) the easiest is sole trade. You'll just have to pay tax once a year and won't have to charge VAT until your income is over the yearly threshold (I think it's £80,000 but you'll have to check). With sole trade it's very simple and as long as you keep a record of your expenses then filling in your tax form is fairly straight forward. Hiring an account isn't nessecary but can be helpful.If you're working for agencies or recuiters then you'll either use a umbrella company or setup a limited company. Things have changed with IR35 coming into play but again it's best to check HMRC which does have some helpful information. I don't work with agencies or recuiters so I can't help too much with how that side of things works but hopefully the HMRC link I sent above helps.Hopefully this helps.Alister
- @Christina Belloge Thank you Christina!! Any of those accounting software is free?
- @Richard Mead Silly question but is it quickbooks free?
- Best is to have a n accountant + an accounting software which gives you real time estimates on all your taxes + revenue/ salary allowances. You can use Emma, Cocconut , quickbooks, Paystream one ..., You will pay 3 taxes:1) VAT quarterly2) Company3)PAYE/ NIC if you pay yourself a salary over £800 per month you will pay quarterly too4) Income tax: 2x yearly in January and in Julyhttps://www.gov.uk/self-assessment-ready-reckonerHope it helps,Regards,Christina
- The tax year runs from 6th April to 5th April each year. Your tax return is then due by the following January (although I tend to get mine off mid April.)If you're unsure, I'd highly suggest getting an accountant (or at least using an accounting software like Quickbooks), as HMRC can dish out BIG fines if you make an error on your return.
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