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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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What Tax Does a Self-Employed Freelancer Pay in a Second Job?


There are several freelancers and self-employed workers currently. As the world is changing, so is business. A lot of professionals now understand the benefits of self-employment and are beginning to follow the trend. 

But being self-employed doesn’t mean you have to do away with tax. You are still good to pay tax as far as you’re registered as a self-employed, and has made over $12,500 in business.

You will find important information on self-employment and all the tax a self-employed is liable to pay as you read on.

As your income increases, the more your tax increases. So, make sure to keep the proof of your expenses and a journal showing the milestones you reached in your job. It will help you a lot.

How to Identify a Self-Employed?


The following people are considered as self-employed:

  • A person working as an independent contractor
  • Someone who is the sole owner of a business
  • A person who provides a side work and has the right qualification and equipment’s to perform
  • A person who is in business for his/herself
  • Anyone who receives a form 1099-MISC or 1099-K in place of a W-2


What to Deduct from Your Side Job or Freelance Income?

There are lots of expenses you can deduct from your organization:

  • If you use your vehicle for work purposes, you should deduct expenses relating to such uses. You can opt to choose the actual expense method or consider using the standard mileage rate. If you opt for the exact process, you should also monitor your vehicle incurred expenses for the year. These include costs like gas, oil, repairs and maintenance, registration, and insurance.
  • The business aspect of your personal property taxes is also collected. So whichever method you select, make sure to monitor and keep accurate track of your vehicle’s mileage from the start to the close of the year.
  • If you have employees, their salaries or wages are also deducted when they are paid during the tax year for any job related to your business. When the sum is substantial, you must ensure that the payments were made to employees that performed services. There are different kinds of withholding for various types of employees. Unique forms must be used for reporting fees made to employees.
  • Expenses made for adverts such as billboards, business cards, flyers, car warps ad companies, etc. should all be deducted from your work income.
  • Any office supplies you purchased to help run your business should be deducted. 
  • Rents paid for office space, tools, and equipment and storage can be ducted also.
  • Banking fees, debit, and credit card payments.
  • Legal fees related to your organization
  • Professional fees including accounting and bookkeeping taxes

Costs that were incurred during the start of an active trade or business. You can deduct up to $7000 of startup cost now, and in a few years later, deduct the remaining.

Self-Employed as a Second Job

If you are a freelancer as a second job, then you should:

  • As discussed above, register with HMRC
  • Pay your tax and national insurance contributions (NICs)
  • File a self-assessment tax return each year.

Being self-employed, you wouldn’t be given a pay slip. So you have to be cautious and smart regarding your tax code on your job. The Website here has suggestions on being prudent with your expenses as a one-person business. 

Usually, the job you get the most income from is classified as your primary job. And if you’re a freelancer in your second job, you might not know the exact figure of how much you earn. This makes it quite difficult to ensure that your full personal allowance is being collected.

If both the main job and your freelance work pays below the personal allowance, you are still allowed to split your budgets both sides as long as you have your proof of income.

If your second job is freelancing and your income is substantial enough, you will pay tax and NICs a year in arrears. This means that the charges and NCIS will need to be paid by January 31st of the following year for the sum you earned in a tax year.

This implies that you have to carefully think of how you will pay what we think is going to be a large sum. The good thing about it is that, already knowing the period you will be spending the fees, you should already know how much you owe and the perfect time to start saving up for it.

It doesn’t matter if you claim to be a freelancer or independent contractor. It all adds up to being self-employed. So, should include your income on a Schedule C sole proprietor, on your self-assessment tax. Even if you’re provided a 1099-MISC, form 1099-k, or ordinary cash and cheque and have to monitor your income as you are entitled to claim all your payment. You can find more here about getting expert financial services in Essex or anywhere else. 

What is the Tax Rate for the Self-Employed in 2020-2021?

There isn’t any difference with the tax a self-employed person pays with any other employees as far as they are eligible to do so. You can use an income tax calculator to find out how much you are required to pay.

In the 2020-2021 tax year, freelancers and self-employed persons pay:

  • 0% on the first $12,500 they make
  • 20% on revenue between $12,501 and $50,000
  • 40% on revenue between $50,001 and $150,000
  • 45% on revenue exceeding 150,000


Take Away

If you are working for a firm and doing freelance work on the side, you are both self-employed and employed and would be required to pay tax through PAYE and self-assessment.

The fee you’re required to pay as a freelance worker depends solely on the amount of money your business has made. For 2020-2021 the personal allowance would apply to a freelancer who hasn’t made up to $12,500 in revenue. And if you have earned up to $12,500, you need to pay the basic income tax rate as outlined above.


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