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Freelance Workers: Tax and NI Responsibilities

By: Beth Morrisey MLIS - Updated: 10 Oct 2010 | comments*Discuss
Tax National Insurance Work

A freelancer who has never been self-employed before will likely find his or her tax responsibility and National Insurance contributions to be a bit complicated. If you are a freelance worker trying to manage your finances and feel a bit baffled by tax and National Insurance then you will want to consider getting professional help in order to make sure that you meet all of your responsibilities in any given tax year.

Freelance Workers And Tax Responsibilities

Self-employed individuals must register with HM Revenue & Customs as such, and they must complete Self Assessment tax returns in order to report income made in a given tax year and therefore the amount of tax owed for that year. You must register as self-employed within three months of commencing such work or you may be penalised for not doing so.

Self Assessment must be completed by 31 October (paper tax returns) or 31 January (online tax returns). How much tax is owed each year will depend on each self-employed worker’s specific situation, so discussing your tax responsibility with an experienced accountant is recommended.

Further information about self-employment, Self Assessment and other tax issues can be obtained from HM Revenue & Customs (www.hmrc.gov.uk). A Newly Self-Employed Helpline also operates on 0845 9 15 45 15.

Freelance Workers And National Insurance Contributions

All self-employed individuals need to investigate what type of National Insurance contributions they need to make. Some people may not owe any National Insurance contributions if their work does not generate enough income. For example, in 2008/2009, self-employed people who do not earn over £4,825 do not need to make an NI contribution if they apply for and are granted an exception. Otherwise self-employed people pay Class 2 contributions which can be paid monthly or quarterly unless they are under the age of 16, over the age of the state pension or are wives or widows who qualify to pay the reduced Class 1 contribution rate.

Some self-employed people will also need to pay Class 4 contributions if they make enough profits to qualify. Individuals who make between £5,435 and £40,040 in 2008/2009 will pay 8% contributions and 1% contributions on any earnings over that amount. For further information, call the National Insurance Self Employed Helpline on 0845 9 15 46 55.

Freelance Workers And Accountants

Many self-employed people find the responsibility of tax and National Insurance calculation to be too much and instead choose to employ professional help for these tasks.

If you are trying to manage your finances but do not feel confident in your ability to do so then hiring an accountant should help you rest easy. Contacting your relevant Institute of Chartered Accountants should help you learn more about how an accountant could help your business, what you can expect from your accountant and how you can find an accountant in your area to suit your needs.

Tax and National Insurance are topics that can become very confusing. Freelance workers should investigate their tax and national insurance responsibilities as self-employed workers, but it may be that hiring a professional accountant helps them feel more confident about meeting their responsibilities in a given year.

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