Tax advice of the week: Go freelance
Oct 16, 2009
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The new 50% top rate of income tax (which comes into force on 6 April next year) is prompting high-earners to look for ways of minimising the impact it will have, say Bob Rothenberg and Linda Bute in The Daily Telegraph. Some BBC presenters, for example, are choosing to go freelance – and this may make sense for other people as well.
Self-employed people have greater scope to claim tax deductions for business-related expenditure (such as phone bills and travel). Freelancers can also "delay paying the 50% tax rate by... changing their accounts year end to 31 March. Anyone with an accounts year end of 30 April will already effectively be paying tax at 50% from 1 May this year on income above £150,000."
The downside of being freelance is that, unlike a full-time employee, you need to set aside funds for tax (and often accountancy), periods of no work, sickness and holidays. You also lose statutory redundancy rights.