I've started working on Upwork and almost finished my first job, how do I deal with tax?

Question

I've just started working as a ruby developer freelancer on the website UpWork (I live in the UK) ,but there are a few things I have no idea of so I was wondering if you could provide some knowledge on:

1. tax
2. vat
3. setting up a company (and how to go about doing this)
4. things you think I should know about

The main difficulty is I don't know where to start in looking for information or which information will be of use to me, I'm pretty much completely ignorant. Even just being pointed in the right direction would be a massive help.

I think that's it for now, if I can think of other things I want to know I will add it to the OP,

p.s. if there's a kind of "get started" guide for this kind of thing, that would be even better.

P.P.S. person that downvoted me? Yeah I'm ignoring you.

Answer 1

This applies to UK only, as at 2016/17 tax year

Tax

This will depend on how you set yourself up. If you are working and want this as side-money, you can let HMRC know and they will arrange a Self Assessment return for you. Best to call them to sort this out.

Basic rule of thumb, put 20% of all income to one side for tax.

VAT

If you start freelancing full time, as a self employed person or as a Ltd company, you will need to charge/pay VAT if you will bill more than £80k. If this is the case, get an accountant! Do not charge VAT if not VAT registered.

Setting up a company

You can do this yourself with companies house for a £100 fee. Don't!

Get an accountant. If you're going to be making more that £40k, Ltd is the way forward. Otherwise, self employed is the way for you.

Things to know about

If you are serious about freelancing or contracting, get a separate bank account. Track your invoices and expenses properly. If you're going to be making more than £40k, get an accountant.

That's all I can think of off the top of my head.

Answer 2

Upwork as well as any other freelancing service has very detailed FAQs. Read them all. They also have live support so use them as well.

For tax and VAT, if I can recall, you can add VAT or tax to any bill you invoice to your clients.

However, all questions regarding the Taxes when money comes to your bank account should be asked your local tax officers. I am sure that any clerk in the tax office will be able to reply to these questions.

Just don't be a fool and rely to Internet replies to things where you can be penalized.