How to Complete Self Assessment with PAYE and Freelance Income

If you receive income both through PAYE (Pay As You Earn) and from freelance work as a sole trader, you will usually need to complete a Self Assessment tax return to report all your earnings to HM Revenue and Customs (HMRC). This article explains how to approach this process accurately.

Who Needs to Complete Self Assessment?

If you have income from self-employment—even if you also have a PAYE job—you must tell HMRC about your freelance earnings through Self Assessment. Tax is normally deducted automatically from your PAYE income, but HMRC does not automatically know about your freelance income unless you report it.

You must register for Self Assessment if you have not done so before and either HMRC asks you to complete a return or you know you have income outside PAYE. You should notify HMRC by 5 October following the end of the tax year (which runs from 6 April to 5 April) if you need to file a return for the previous tax year.

Gathering Records

Before filling in your return, collect all relevant documents:

• Your P60 or P45 from your PAYE employment, showing your income and tax paid.
• Records of your freelance income, such as invoices or bank statements.
• Receipts or records of allowable business expenses related to your freelance work.

Keeping detailed records is important to complete your return correctly and to claim any allowable expenses.

Filling in the Self Assessment Tax Return

When completing the tax return (usually online), enter your PAYE income details in the employment section. HMRC already has this information but you should include it to show your total income.

Report your freelance income and allowable expenses in the self-employment section. The profit (income minus allowable expenses) from your freelance work will be added to your total income to calculate your tax liability.

If your freelance income is below the trading allowance threshold of £1,000, you do not need to declare this income or claim expenses for it. If your freelance income is over £1,000, you must report it, and you can either claim actual expenses or use the trading allowance (which gives a £1,000 tax-free allowance instead of deducting expenses).

Paying Tax and Deadlines

HMRC will calculate your tax bill based on all the income you report. You must pay any tax due by 31 January following the end of the tax year. Late filing or late payment can result in penalties and interest.

Tax rates depend on your total income and personal circumstances. If you have other income types, such as capital gains, these may need to be reported separately in your Self Assessment.

Summary

To complete Self Assessment with both PAYE and freelance income:

1. Register for Self Assessment if required, by 5 October after the tax year.
2. Gather all income and expense records for both PAYE and freelancing.
3. Complete the tax return, entering PAYE income in the employment section and freelance income and expenses in the self-employment section.
4. Submit your return by the deadline and pay any tax due by 31 January.

For detailed guidance or if your situation is complex, consult HMRC’s official Self Assessment pages or seek professional advice. This will help ensure you meet your obligations accurately and avoid penalties.

Official reference: https://www.gov.uk/self-assessment-tax-returns. Always check the latest official guidance. Related forms: Browse our form category.

Important: This article provides general information. Government rules, forms and procedures can change, and this article may not reflect the latest updates. Check current GOV.UK guidance or the relevant authority before relying on it. ITG & Co. is independent and is not affiliated with a government department.