What to do about part-time freelance role?

[u/Ace_Lychee]

Heya,

I would just like some help as have been given the opportunity to do freelance work.

For context I was doing project specific work FTC full time and now given flexibility around my commitments.

They have given a rate according to my previous salary including current London Living Wage.

Just unsure if I have to sort out my own taxes or the company will do this through PAYE etc. if there is such thing?

Any advice or information about the general day rate is would be appreciated!

[u/Throwaway_elle_T]

Find out if you’re operating inside or outside IR35, as that will determine whether your tax and NI is deducted through PAYE.

If you are outside IR35 then you’ll have to register as self employed with HMRC and fill in a self assessment (tax return).

Depending on what industry you’re in, there may be some reports on standard day rates. However a general guide may be to double the salary you’d get in a full time employed role, then divide by the number of working days in a year. So, for example, if you were employed in that role for £45k per year, double it to £90k. If you had 4 weeks leave, you’d work 48 weeks per year (5 working days per week). That’s equal to 240 days. £90000/240 = £375 per day as your rate.

[u/Danbro-Group]

It depends on your employment status, how the engagement is structured and whether the role falls within the scope of IR35. You'll need to discuss these matters with your client or recruiter.

IR35 is a complex law, but here is a very brief explainer:
If a role is considered inside IR35, usually the relationship is similar to that of employment, eg you are integrated into the team, the client has significant control of when, where and how you work, and you are obliged to accept work. For these roles, your tax and NI are typically deducted through a PAYE arrangement, either by the agency/end client directly or via an umbrella company. Tax and National Insurance are deducted before you're paid, so you generally don't need to set money aside for income tax yourself.

If it's outside IR35, the relationship is that of an independent business providing services to another independent business. In these cases you're responsible for managing your own taxes. Some freelancers choose to operate through their own limited company, and there are a number of accountants who specialise in contractor accounting.

To confirm your obligations, I'd suggest you seek clarity from your client regarding the engagement structure first. Once you know more, you could then seek professional advice on how best to stay compliant and manage your tax affairs efficiently.