Contractors' Questions: Will HMRC tell my employer I'm freelancing?

Freelancer’s Question: I'm currently working at a medium-sized company in a permanent position but I am in the process of registering as self-employed with HM Revenue & Customs so that I can do some freelance work during evenings and weekends. I’m doing all of this properly, but I am yet to inform my employer. So I’d like to know, will the Revenue contact my employer to notify them of changes to my income, tax position or NI liabilities? Or is it the case that my employer will be able to see any changes suggestive of my self-employment when they do the payroll? I'm not very keen for my employer to find out what I'm doing as a business, at this stage anyway!

Expert’s Answer: In answer to your query, the Revenue will not contact your employer to notify them of your decision to register as self-employed, nor will your employer notice any change to your tax code when completing payroll.

From an accountancy point of view, it is important that you record all income and expenditure, and seek out advice on what expenditure it is appropriate to claim for. A good accountant should save you money in this respect!

If you have recently registered as a sole trader, or are about to, your first tax return will be due to be filed by 31.01.2013 and should include details of PAYE and self-employed income for the year 06.04.2011 to 05.04.2012.

However, although not our field of expertise, I would recommend that you have your contract of employment checked to ensure that there are no restrictive clauses or covenants prohibiting you from undertaking this work, even if it is done during evenings and weekends.

The expert was Alasdair McGill, managing director of Freelance World, an accountancy and tax specialist for freelancers and the self-employed.