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Want to know more about ‘freelance tax’? Well read on!
As a freelance writer, the tax you pay will depend on your employment status. If you’re employed full-time but freelance as a side gig, you’ll be taxed in addition to your PAYE taxes.
An example of this would be if you work in marketing full-time and you’re a novelist on the side.
In contrast, if you’re a full-time sole trader and you write freelance for multiple clients (although this is not always the case), you’ll have to complete a tax return to pay tax on your income.
You’ll be taxed at the 2023/24 Income Tax rates:
| Income | Tax Rate | Tax band |
| £12,570 | 0% | Personal Allowance |
| £12,571 – £50,270 | 20% | Basic Rate |
| £50,271 – £125,140 | 40% | Higher Rate |
| More than £125,141 | 45% | Additional Rate |
FYI: These rates are the same for employed people.
In this case, you won’t necessarily have to complete a tax return. It depends how much you earn from freelancing. If you earn up to £1,000 per year, this is tax-free under the Trading Allowance.
For anything in excess of £1,000, you’ll have to register with HMRC and complete a tax return. As a result, it’s really important that you keep track of your income (dates, amount earned etc.) using invoices and any relevant expenses that you can deduct.
It’s also important to bear in mind that if your earnings exceed £6,725 per year, you’ll also have to pay Class 2 National Insurance and Class 4 National Insurance on anything over £12,570.
Take a look at our self-employed and employed tax calculator to calculate what you owe.
As a PAYE your employer will calculate and deduct both Income Tax and National Insurance contributions for you.
Because you’ve earned over £1,000 from self-employment, you need to submit a Self Assessment tax return and pay Income Tax and National Insurance on this income.
These are all deducted from your salary by your employer every month.
You pay no Income Tax on the first £12,570 that you make.
You pay £5,486 (20%) on your salary between £12,570 and £40,000.
You pay no NI contributions on the first £9,568 that you make.
You pay£3,652 (12%) on your salary between £9,568 and £30,432
That’s not all. Your employer is also required to pay separate NI contributions, but these won’t come out of your wages. In your case they would need to pay an extra £4,200 – you should see these on your payslip.
You will need to submit a Self Assessment tax return and pay these taxes and contributions yourself. The deadline is January 31st of the following year.
You pay £2,054 (20%) on your self-employment income between £0 and £10,270.
You pay £7,092 (40%) on your self-employment income between £10,270 and £28,000.
You will need to pay Class 2 NI worth £159.
You will also have to pay £63 (9%) on £702 of your self-employment income.
You will have to pay an additional £355 (2%) on another £17,730 of your self-employment income.
As a sole trader, you’ll be taxed on your overall profits. On anything that you earn over the Personal Allowance, you’ll be taxed at 20% until you reach £50,270. From here, you’ll be taxed at 40%.
You may want to set yourself up as a limited company, which means that your writing business is set up as a separate entity from you. To do this, you should be mindful of the fact that the tax implications are a little different:
Whether you’re a full-time freelance writer or whether it’s your side gig, there are expenses that you can claim that will reduce your tax bill.
Again, make sure that you keep track of your spending and hold on to all of your receipts so that you have evidence to offset your expenses against your income.
Here are a few examples of what can count as a tax deduction:
For a more detailed list, head over to HMRC.
We’ve got you covered! 🙋 Check out our tax return service here.
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