In a simple situation with just one employment HMRC will issue a code that has a personal allowance (assuming income is less than £100k) and a claim for professional expenses, and this will approximate the right amount of tax deductions, with just a tweak at the end of the year when the actual professional expenses are known.
However, when there are multiple employments coding gets more complicated – because HMRC will need to try to anticipate the use of your tax bands which cannot really be known in advance – and thus too much or too little tax is likely to be deducted.
Where salaried at the beginning of the year, then freelance:
- The code will only have used part of the year’s personal allowances – so the rest will be available against self-employment.
- You should notify HMRC of start of self-employment.
- Then you should plan tax savings with a deduction for part of the personal allowance. If you are a higher rate taxpayer it will be more complicated – your accountant will be able to help you.