Will I pay tax twice?
In this article self employment means just that. A person is self employed if they run their business for themselves and takes personal responsibility for its success or failure. A self employed person can also be sued, and risks losing everything they own.
Self employment does not mean running a limited company which offers freelance services and which has limited liability protection, for example “send in the bailiffs to seize this pen and this laptop, sell them at auction and see what you get”. In a legal sense a freelancer running a limited company is special type of employee.
So, if you’re both employed and self employed at the same time, this is what you need to know. For tax purposes, all of your income in a single tax year is lumped together and the tax calculation is a single exercise. Nobody should have to pay tax twice.
However, with National Insurance Contributions, the system is peculiar and there is often a risk of paying too much.
Having said that, both the Revenue and the Contributions Agency have been know to make mistakes, lots of mistakes. So it’s worthwhile having an accountant check the position.
If you are one of those people who dips in and out of employment, and in and out of self employment, then it’s worthwhile keeping very close tabs on start dates and end dates with your different engagements, and records of all income and expenses. When you have a major project (and are working under PAYE) it does not mean that your self employment ceases. The best thing is to keep your status as self employed until such time as you know that there is not going to be any more self employed work.
That saves you from having to register and de-register as self employed on a regular basis. It also means that in lean times, any loss you make on the self employed business can be set against your PAYE income. So if you still spend money on prospecting, phone calls and advertising (in the course of your self employment) your losses can sometimes result in a repayment of PAYE taxes.