PAYE and Self-Employment in the Same Tax Year: Completing Your Self Assessment Return

If you are employed and paid through PAYE (Pay As You Earn) but also started trading as a sole trader in the same tax year, you will need to complete a Self Assessment tax return to report all your income to HM Revenue and Customs (HMRC).

Why You Need to File a Self Assessment Return

Income from employment paid under PAYE is usually taxed automatically via your employer. However, if you have additional income from self-employment, HMRC requires you to complete a Self Assessment tax return to declare this income and work out how much tax you owe overall. This applies even if your PAYE income has already had tax deducted.

How to Report Both PAYE and Self-Employment Income

• PAYE Income: When filling in the tax return, enter your employment income and tax deducted as shown on your P60 or P45 forms in the employment section.
• Self-Employment Income: You must report your self-employment income and allowable business expenses in the self-employment section. Keep accurate records such as invoices, receipts, and bank statements to support your figures.

HMRC uses the information you provide to calculate your total taxable income and tax liability for the year. This means your self-employment profits could affect your overall tax rate.

Important Points and Examples

• If you worked as an employee earning £20,000 under PAYE and also made £5,000 profit from self-employment, both amounts must be included in your return.
• If your self-employment income is below the £1,000 trading allowance, you do not need to declare this income or expenses. However, if your income exceeds £1,000, you must declare it either by deducting allowable expenses or by using the trading allowance, whichever results in the lower taxable profit.
• You do not need to pay Class 2 National Insurance if your self-employment profits are below the Small Profits Threshold, but you should check the current limits.
• If you only became self-employed partway through the year, you report income and expenses from the date you started trading until the tax year end (5 April).

Registering for Self Assessment

If you have not previously submitted a Self Assessment return, you must register with HMRC by 5 October following the end of the tax year in which you became self-employed. For example, if you started self-employment in the 2023–24 tax year (6 April 2023 to 5 April 2024), you should register by 5 October 2024.

Deadlines and Payment

You must submit your completed Self Assessment tax return by 31 January after the end of the tax year. For the 2023–24 tax year, the deadline is 31 January 2025. Any tax due on your combined income must also be paid by this date to avoid interest and penalties.

Record-Keeping

Keep thorough records of both your employment income documents (P60, P45) and self-employment business records. This will help you complete your return accurately and provide evidence if HMRC requests it.

For detailed guidance on completing your Self Assessment tax return, including specific sections to fill in, consult the official HMRC guidance or their online services.

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.