Most students will end up taking a part time job in the union bar, local supermarket or restaurant to help make ends meet and ensuring they have enough money to enjoy university life.
One option rarely considered however is the idea of freelancing, or becoming self-employed. Whilst it doesn’t have the benefits of reliable, contracted hours and employee rights it does offer you the ability to decide on your own hours, be your own boss and often results in a greater sense of achievement. Not to mention an hourly rate that will beat that of any local fast food joint.
Ultimately you will learn a lot about running a successful business, finance, tax and stand you in good stead for life beyond university. There is also the benefit of boosting your CV, gaining valuable experience and setting yourself apart from other possible job candidates.
Deciding what to do
One good place to start is by looking at the subjects or degree you’re studying. Often you’ll find that you’ll be considered more reputable, and thus more likely to find work if you can prove your passionate about the subject.
As a Computing Science student, I built a number of small websites for local individuals and clubs during my second year of Uni.
Depending on the type of work you’re considering, this can vary from simply a card in the campus supermarket window through to Gumtree and if you’re prepared to invest a little, placing simple ads on Facebook or Google (it can be cheaper than you’d think for highly targeted audiences).
Once you get that break of your first one or two clients, if you do a good job its likely you’ll either be asked back for more work or referred to others.
So yes, unfortunately you will need to pay tax on anything you earn. The taxman (HMRC) takes a dim view of those who don’t pay their share!
In a more traditional ‘employed’ role, your employer takes the tax due out of every month’s salary on your behalf, so you don’t notice it. This is known as Pay as You Earn (PAYE) and is why your gross (pre-tax) and net (post-tax) differs.
When self employed however, you need to inform the HMRC of your earnings by completing a self-assessment tax return every year. This simply details the earnings you made in the previous tax year. This calculates the tax due and you pay accordingly. Assuming you don’t become the next Mark Zuckerberg, its unlikely you will need to pay any income tax whatsoever as any earnings below £10,000 are tax free. Additionally if your profits are less than £5,885 then (subject to obtaining a small earning exception) you won’t have a National Insurance to pay either.
HMRC have put together a great guide ensuring you keep on the right side of the taxman when starting your own business – HMRC – Thinking of working for yourself?
The self-assessment process can get a little more complex if you work elsewhere as an employee of another company. Your self-assessment return will need to include details of both employed and self-employed incomes. Employed income will be detailed on your P60 (issued by your employer, usually shortly after your April pay slip) or if you are no longer in employment in April, it’ll all be detailed on your P45 issued when you left employment.
- Remember to keep all records of invoices and business related receipts – it’ll make calculating all your earnings and expenses you have made over the full tax year much easier
- Remember, if your earnings are simply being transferred into your every day back account, keep some back to pay for the tax bill once your self-assessment has been processed.
- Issue invoices promptly with payment terms detailed at the bottom (usually 30 days from date of invoice). Download our sample invoice.
- File your invoice so you don’t forget to chase payment
- Keep all HMRC and tax document well organised, you may often need to refer back to it
- Tools such as gosimpletax.com it makes the self-assessment process a easier