additional weekend income

bemak

I was approached during the year to do some "nixer" work for another sole trader. The work is 3D modelling, and as I enjoy it, I thought that it would be a handy little earner. As I want to do it all above board and issue invoices, I duly registered as a sole trader.

The work is fairly intermittent, I've probably only done 3/4 jobs this year so the income from it would be in the 3-5k bracket.

However, as I'm on the higher rate of tax with my Mon-Fri job, anything I earn with this side gig is crucified in tax. As advised by my accountant, I've been accumulating permitted expenses, the main of which would be a small bit of mileage to do a quick photo survey of the site but other than that it's fairly light.

Just wondering if I'm missing a trick? As I'm beginning to wonder if it's worth the hassle. Obviously I could quote a higher price but then I just wouldn't get the work.

gerrybbadd

bemak wrote: »

I was approached during the year to do some "nixer" work for another sole trader. The work is 3D modelling, and as I enjoy it, I thought that it would be a handy little earner. As I want to do it all above board and issue invoices, I duly registered as a sole trader.

The work is fairly intermittent, I've probably only done 3/4 jobs this year so the income from it would be in the 3-5k bracket.

However, as I'm on the higher rate of tax with my Mon-Fri job, anything I earn with this side gig is crucified in tax. As advised by my accountant, I've been accumulating permitted expenses, the main of which would be a small bit of mileage to do a quick photo survey of the site but other than that it's fairly light.

Just wondering if I'm missing a trick? As I'm beginning to wonder if it's worth the hassle. Obviously I could quote a higher price but then I just wouldn't get the work.

Not really.

If you're above the cut off point in your regular income, the additional income (less expenses) will be liable at the higher rate also unfortunately.

ace_irl

If it is only 3-5K you've earned, could be worth your while asking your accountant to look into investing the profit in your personal pension. You'll save 40% in the current year on what you invest in your pension and 40% off your preliminary tax payment for 2017.

It will also grow tax free over the years so could be something to look into.

bemak

ace_irl wrote: »

If it is only 3-5K you've earned, could be worth your while asking your accountant to look into investing the profit in your personal pension. You'll save 40% in the current year on what you invest in your pension and 40% off your preliminary tax payment for 2017.

It will also grow tax free over the years so could be something to look into.

This is exactly what I was wondering. Thanks!

bemak

gerrybbadd wrote: »

Not really.

If you're above the cut off point in your regular income, the additional income (less expenses) will be liable at the higher rate also unfortunately.

Ya I was aware that this is non-negotiable, just looking for ideas - like ace_irl has suggested.

Can you set up a pension fund that you can put varying amounts of money into when you have it to put in?

ace_irl

bemak wrote: »

Ya I was aware that this is non-negotiable, just looking for ideas - like ace_irl has suggested.

Can you set up a pension fund that you can put varying amounts of money into when you have it to put in?

You can indeed, as you are self employed, to a degree, you can set up a pension outside your employment pension, if you have one.

Your accountant should be able to do all this for you. Going forward, you could make a contribution every year around this time in order to reduce your tax bill.

If you make payments to it during the year, keep note and your accountant can include them in your tax return every year.

There are restrictions on how much you can invest and claim relief on, they are based on your age and income but your accountant should be able to tell you your maximum amount and you can go from there.

bemak

ace_irl wrote: »

You can indeed, as you are self employed, to a degree, you can set up a pension outside your employment pension, if you have one.

Your accountant should be able to do all this for you. Going forward, you could make a contribution every year around this time in order to reduce your tax bill.

If you make payments to it during the year, keep note and your accountant can include them in your tax return every year.

There are restrictions on how much you can invest and claim relief on, they are based on your age and income but your accountant should be able to tell you your maximum amount and you can go from there.

Great advice, thanks a million.

So essentially, just so I have it right in my head, around this time of the year, when I work out my net income after expenses, and say it's 800e for arguments sake - as this is the taxable amount, I can put that amount into a pension fund and 'avoid' the tax on it?

ace_irl

If the €800 is with in your pension contribution limit then you would get 40% of it off your tax bill so a saving of €320 and then you would also save €320 on your PT payment for the next year so a total savings of €640.

You can also make top up payments to your employment pension as once off. So if your limit for your self employed pension was low you can use the extra income to invest in your employment pension and get the same savings.

ace_irl

From a cash flow perspective there wont be a savings to you as you are physically paying the money, but you're investing it in yourself for the future instead of paying it to Revenue which is always better.

bemak

ace_irl wrote: »

From a cash flow perspective there wont be a savings to you as you are physically paying the money, but you're investing it in yourself for the future instead of paying it to Revenue which is always better.

ya exactly, that money is going to be tied up but as you said, it's an investment in myself. the point was to make the most of the additional work and this would tick that box. hopefully, as the I'm dealing with relatively low amounts, that the thresholds won't be too much of a problem.

I only started this work in March so I haven't had to submit taxes yet so I'll be well prepared by this time year year.

ace_irl

Exactly, and you can always file early if you're organised. The earlier you can file your tax return the more time you give yourself to pay the tax bill if you need to.

Make sure you keep note of all your expenses, even lunch when you're working on a project, parking, tolls etc. It all adds up to help reduce your bill.

bemak

I've been expensing what I can but as it's an additional income, it's hard to. I've put phone and internet at 50% because I actually couldn't work without them but I think 50% is a decent stab at the allowance between work and personal. I actually use them both more for work than anything and even at that, my phone bill is only 17e a month so not exactly a massive saving.

I've also expensed a tiny percentage of the rent (6%) for the small workspace that I use. (5sqm of 80sqm).

ace_irl

Electric bills can also be claimed if you operate out of your home, normally about 1/3 for business use is allowable.

Of course you have stationary/printing as well, you would be surprised how much that can add up to by the time you buy folders etc for organising your invoices and so on.

You also have your accountancy fee to include.

And then you can claim on any medical expenses you have. If you have insurance and you claim back some of the cost through that, you can still claim 20% of the balance not refunded by your insurer in your tax return.

bemak

1/3 is decent, this probably would assume a mon-fri type situation. I doubt I could do that although I'm sure I could claim a small percentage like I've done with rent. I think I'm probably worrying too much about it, considering the few quid involved.

I knew about the accountancy fees and I was told I could claim books relating to work too. I tend to get a few every year.

ace_irl

Don't worry about it too much, you have 4 years to go back an amend if down the line you find something you should have claimed as an expense.

bemak

Just wanted to update on this. So I undertook a year from May 2017 to end of April 2018 and have paid the tax owed for that year etc. I'm at the point now where I don't think I have the energy for the nixers for another year - particularly as I will need to pay prelim tax again in October and don't foresee myself taking on any jobs up until then. I just don't have the time. 

So I was wondering; as I haven't taken on any work since April and as my tax is all up to date, can I just unregister as a sole trader now and just draw a line under things?