Freelance tax questions

Hi,

I'm a US citizen living in the UK under a spousal visa since Oct 2010. I've decided to plunge into working as a freelance writer. I have a few questions:

1. I understand that I need to register with HMRC as self employed. Is this before I actually get paid for my services or after I get paid?

2. Once I start earning income from freelance work, will I continue to file a 1040 (as long as I make over $3,700 in gross income as a married person filing separately)?

3. Do I need to file any other forms or could I qualify for any exemptions?


Thanks!

Hi magikalcattie I dont have any answers for you but wanted to say I am in similar situation and posting my question soon!     Hope we can get the answers we need. 

What kind of freelance writing are you wanting to do?

Hi, geordiewife

Sorry for the late reply. I'm interested in freelance copywriting. What sort of work are you wanting to do?

Hi,

I'm a freelance television editor, so I can tell you what I do.  If it turns out I'm wrong, or I used inexact verbiage, it's because I'm not a tax professional.  

First, there's a lot of good info about freelance taxes (they call it self assessment) here:

http://www.hmrc.gov.uk/sa/index.htm

1. I understand that I need to register with HMRC as self employed. Is this before I actually get paid for my services or after I get paid?

I registered as soon as I came over to the UK, before I started working.  I don't know how critical registering immediately is; I get the feeling it's just to get your name in the system so they know to send you info about your taxes.

2. Once I start earning income from freelance work, will I continue to file a 1040 (as long as I make over $3,700 in gross income as a married person filing separately)?

Yes, you always have to file US taxes.  You may or may not have to pay anything.

3. Do I need to file any other forms or could I qualify for any exemptions?

Keep track of your expenses related to your freelance work, as you're allowed to take exemptions for some of them.  The guides on the website I linked to above explain it in detail.

Thanks for your reply, camoscato!

I did register with HMRC. I imagine I'll get something in the post soon.

I do have a lot of questions concerning the financial side of freelancing. Do you use any invoicing services? I've heard of services like FreeAgent and Crunch but am not sure what's best. I would prefer to not hire an accountant but I'm afraid, maths isn't my strength so would like to go for something easy to use and not too expensive. Any suggestions?

Also, I know the UK tax year runs from April to April. I won't be filing my US taxes this year because I didn't make a lot of money last year as I only worked for two months. Do I need to file now that I've registered as self employed (even if I don't think I'll make any freelance income before the end of the UK tax year?

Do you use any invoicing services? I've heard of services like FreeAgent and Crunch but am not sure what's best. I would prefer to not hire an accountant but I'm afraid, maths isn't my strength so would like to go for something easy to use and not too expensive. Any suggestions?

No, I do it all myself, keeping track of outstanding invoices, incoming payments, and expenses on a plain old spreadsheet.  Some time after the tax year ends, I go on the HMRC website and start a self assessment.  The website does a good job of walking you through the process and handling the math for you, so as long as you know how much you made and how much you spent on expenses it's pretty easy.

The thing to remember is even though the tax year runs from April to April, you don't have to file until January 31st, so you have a loooooong time to get it all together and get it done.

Also, I know the UK tax year runs from April to April. I won't be filing my US taxes this year because I didn't make a lot of money last year as I only worked for two months. Do I need to file now that I've registered as self employed (even if I don't think I'll make any freelance income before the end of the UK tax year?

I wouldn't, especially if you didn't/won't make any money before April anyway.  My guess is if anyone ever asked you could just explain you registered in March but didn't make any money until you started working in April (or whenever).  

Again, I'm not a tax person, so I may have just advised you to break the law, in which case I plead ignorance and throw myself on the mercy of the court.

If you're self-employed, then I think the tax threshold is only $400, not $3,700.  Sorry.  See Chart C in the beginning of the 1040 about who has to pay.

Thanks for the reply, dani m. :-)

So, does this mean I would have to file next year (providing I make the equivalent of $400 through freelance work) and NOT file this year?

I wouldn't file this year, as you haven't made any money at it yet -- unless you have another reason for filing.