Finance Issues for Part Time Freelancers
Freelancing part time requires a lot of dedication. It's never easy to juggle two jobs, but when one job is worked as an employee and one requires self-employment it can be even harder. Finances in particular can become a source of concern for those who freelance part time.
If you are considering cutting down on your day job to pick up some part time work, remember to set up your finances as you would if you were freelancing full time. Register as self-employed for tax purposes and set up a business bank account, but then try to sync your work with your day job. This should make it easier for your life to feel more integrated and your freelance work more ordered.
Registering As Self-EmployedAnyone who makes money from more than one source is responsible for reporting their total income. This means that part time freelancers should register as self-employed with HM Revenue & Customs, and this registration must be completed within three months or penalties may be applied. Each year self employed persons must complete a Self Assessment tax form detailing their earnings from all sources, though some deductions may be able to be made so keep track of all of your freelance business expenses.
Taxes and National Insurance contributions will be calculated based on your total earnings, so remember to set aside money for those from each freelance payment that you receive. Cash payments are fine for your freelance payments, but just remember that these payments must be reported as you would report any other form of payment. The Self Assessment form needs to be completed by all self employed persons each year, regardless of whether or not you think you made enough income to be taxed. Hiring an accountant to take care of all of your tax concerns is also an option.
Setting Up A Business Bank AccountIn order to keep your finances neatly separated it is best to open a business bank account when you freelance part time. Your personal account will be where your paycheque is deposited by your employer after taxes are take out, so look at your personal account as money that you know your own.
Your business account, on the other hand, is the account from which you will need to deduct business expenses as well as tax payments and National Insurance contributions. This means that your business account may have money in it that is not yours for spending. When you do make enough profit to have some money "left over" after expenses, taxes and NI contributions consider paying yourself from your business account to your personal account so that you can enjoy your extra salary and watch your personal account grow with profits from both of your jobs.
Syncing Your Freelance Work With Your Day JobWhile being your own boss means that you can make your own business decisions, many part time freelancers find it best to take their business lead from their day job. That is, when it is invoice day at the day job it is invoice day for their freelance work. When it is performance review day at the day job it is performance review day for their freelance work.
When a new marketing campaign is announced at the day job it is time to review marketing plans and budget for freelance work. Though it will mean giving up a little bit of control over business planning for part time freelance work, syncing freelance work with your day job will allow you to focus on one thing at both jobs which may ultimately be more important that having total planning control.
Part time freelancers have their own finance issues. Registering as self-employed, setting up a business bank account and syncing your freelance work with your day job all help part time freelancers to better handle their profits and financial obligations.