Balancing PAYE with Contract/Freelance

[ianbhenderson73]

Good evening

I don't know if this sounds like a silly question, but I'm going to go ahead with it anyway.

I'm about to take up a permanent position as a software developer, after a little over a month out of work as a result of redundancy. I was originally going to try and get into the contracts market but there was nothing available and so I have taken this job. I'm anticipating being very busy with my new role, but I still have a niggling desire to work on a freelance basis and have already had word from a friend-of-a-friend about some web development work that he might be looking to have completed for his business.

It's fairly obvious that when I start tomorrow, I'll be going onto a PAYE arrangement as you would expect. My question is this: can anyone tell me what the implications would be from an HMRC perspective if I also decided in the future to register a Limited Liability Company, through which I would carry out such freelance work as presented itself to me. I'm understandably reluctant to do anything that might cause me any problems with the Revenue & Customs people, and I'm conscious that any advice given here would probably need to be confirmed with a tax accountant. However, I'm keen to hear from anyone out there who perhaps has recent experience of taking this kind of approach.

Thanks In Advance



Ian Henderson

[ASB]

You incorporate a company. You are a director of it. It may or may not pay you a salary (your choice). If it does pay you a salary it's not a problem, but it is of course just a second job.

Tax is cumulated, NI isn't. [i.e. you only get 1 set of tax allowance].

It is not a problem, and not particularly complicated.

You can (IR35 permitting) pay yourself dividends or just leave the money in the ltd.

Of course the terms in you contract of employment may have restriction on what else you can do.

[ianbhenderson73]

Of course the terms in you contract of employment may have restriction on what else you can do.

That sounds like sage advice. As far as I can see from my contract, it contains the usual detail about devoting my time and energies to my employer, which I would expect. There is also the expected detail about not engaging in any other employment or having a financial interest in any company that would be considered to be in conflict with the interests of my employer.

As far as I can see from that, the business that I'd be looking to start wouldn't conflict with my new employer's business. The freelancing that I'm looking at is in the area of home computer repairs, broadband assistance and web design consultancy.

Thanks for your input on this one.

[SarahL2012]

I've had both PAYE & a Ltd running concurrently. Providing your Ltd work is done in your own time & there is nothing in your employment contract prohibiting it (mine had a clause saying I couldn't take any directorships without prior approval) then I don't think there's a problem

[Maslins]

Sole trader instead?

What you're looking to do isn't contentious or difficult.

My only thoughts would be whether it was worth incorporating a Ltd Co. If sideline projects are likely to only lead to modest amounts as done around a full time job, you may well find it makes more sense to instead register as a sole trader.

Pros:
- much less admin, just one annual personal tax return,
- fairly straight forward to DIY, or lower accountancy fees.

Cons:
- you'll be taxed on the profit, potentially at higher rate tax dependent upon your day job salary. With a Ltd Co you could instead build up a war chest, suffering corporation tax only, delaying withdrawing it until a later time,
- possible legal benefits (limited liability etc).

[jmo21]

What you're looking to do isn't contentious or difficult.

My only thoughts would be whether it was worth incorporating a Ltd Co. If sideline projects are likely to only lead to modest amounts as done around a full time job, you may well find it makes more sense to instead register as a sole trader.

Pros:
- much less admin, just one annual personal tax return,
- fairly straight forward to DIY, or lower accountancy fees.

Cons:
- you'll be taxed on the profit, potentially at higher rate tax dependent upon your day job salary. With a Ltd Co you could instead build up a war chest, suffering corporation tax only, delaying withdrawing it until a later time,
- possible legal benefits (limited liability etc).

This.

I'm sure the figure I've seen mentioned on here is £30,000 as being the lowest you'd expect to earn to make a Ltd worthwhile.

But you may well be working a lot of evenings and weekends to do it.