Freelancing around full-time employment

Before speaking to potential freelance clients or starting your side business, it’s important to check your current employment contract. There’s nothing in UK law to prohibit anyone from being both employed and self-employed at the same time. But you might be contractually obliged to inform your employer, even if you’re not prevented from running your own business in your spare time.

Contract restrictions will often depend on the industry you’re working in, and how closely that might be related to your self-employment. For example, contracts could include clauses which state company equipment can only be used for work purposes, and if you run your side business from them, your employer might have rights to the intellectual property. Or that you'd be prohibited from freelancing for clients which came to you via your main employment.

In many cases, you’ll need to inform your line manager if you’re taking on outside work. And having written permission will help to safeguard you from any issues or complications in the future, particularly if you’re risking any conflict of interest.

Breaching a contract with your employer can have serious consequences, including immediate dismissal. And if you’re told that you can’t pursue a freelance opportunity or side project by your manager, it gives you the opportunity to potentially look for a new job. Many companies now see side hustles as a potential benefit for their staff, especially if it means they don’t have to increase wages as often.

While informing your employer about any part-time freelancing or a new side business comes at your own risk, you’ll definitely have to inform HMRC straight away. And while their records are confidential, if you decide to operate as a limited company, the Companies House listing will be public and found via any online search.

Even if you’re only working for yourself part-time around your main job, you’ll be responsible for any additional tax and National Insurance payments required. 

Income tax rates are calculated on total earnings, so any self-employment profits will need to be declared alongside earnings from your employer. This will be done as part of your Self Assessment tax turn each year.

In addition to tracking your income, expenses and profits, you’ll need to save some of your self-employed income to cover the additional tax cost. And you should also check whether any additional amounts will fall into a higher rate of Income Tax. If you’re already earning close to the basic rate limit for Income Tax, which is £37,700 at the time of writing, any taxable income above that will incur the higher rate of 40%. 

Anyone self-employed will usually pay Class 2 National Insurance if your profits are more than £11,908 per year, which is currently rated at £3.15 per week, and Class 4 National Insurance on profits above that figure (9.73% on profits between £11,909 and £50,270, then 2.73% on profits over £50,720 at the time of writing). This also applies if you’re the director of a limited company, but you may decide to take a larger amount of your income through dividends rather than a salary.

When you’re considering freelancing or self-employment around a full-time job, the first step should be to identify what’s personally important to you. In addition to your working hours, you may have existing family commitments, hobbies and other responsibilities that demand some of your time.

Are you aiming to build a new business empire and move to full-time self-employment? Intending to have a sustainable extra income stream? Or use freelancing to explore new skills or an existing passion and possibly bring in a little bit of money at the same time?

This will give you a clear picture of how much time you can realistically spend on your self-employed work, and what you may need to sacrifice. For example, you may want to get up earlier to do any freelance work before taking children on the school run and heading to your full-time job. But this might mean skipping weekday gym visits for a while. 

Alternatively, you might find that cutting down on evening TV or video games can free up some time to devote to your new business. And that you can still schedule regular time with your partner or family.

Investing in a separate computer and mobile phone for your self-employed business will avoid any contractual issues from using equipment supplied by your employer. And also prevent the risk of accidentally tweeting from a company account by mistake, or your boss having access to your freelancing accounts.

Spending extra time on work needs to be financially rewarding, whether it’s a short-term gain or to achieve a bigger monetary benefit in the future. So you need to understand how much you’re earning from your employed career, and how to set realistic freelancing rates to make the extra effort worthwhile. Also, set targets and goals for your self-employed business to know when it’s financially viable.

Having goals and targets means you’ll know if you’re heading in the right direction to eventually move into self-employment full-time. Or if it’s bringing you useful extra income, enjoyment or skills that are worth pursuing.

And finally, always try to be realistic about your limits. Self-employment isn’t the right career option for everyone, and you might decide that you’d prefer to focus on your full-time job rather than quit to become a professional freelancer. Or you may need to pause things if family and friends need to take priority for a while. One of the biggest advantages to working yourself is having the control to make those decisions, but you can only choose the right option if you’re able to see things impartially, or by getting some outside opinions and advice.