Combining self-employment with work as employee, does it pay off?

Are you considering starting your own business, but still have salaried employment that you don't want to give up (completely)? This is possible but you have to take a number of things into account. Start well prepared and check which tax and administrative matters you need to take into account.

To register or not?

If you start your own business, your journey starts with a registration at the Chamber of Commerce. It is important that you have established a number of things before you register. First check whether you meet the entrepreneurship criterion: do you plan to provide products or services to others for financial compensation? Then you fall under the criterion and you can (or must) register. Are you in doubt? Check out this infographic.

Secondly, it is important that you check in your contract what has been agreed with your employer about ancillary activities. This will prevent you from undertaking activities that conflict with these agreements. Our advice: discuss your plans with your employer in good time, transparency prevents problems.

Hobby or business?

Have you earned some extra money by selling homemade jewellery, creating a website for a friend, selling your layette on Vinted or perhaps from another hobby? Then you would usually have to report that income to the tax authorities. But because you often earn little money (in relation to the effort), the law generally does not see this as a business.

Starting a business

If you meet the entrepreneurship criterion and your intended work as an entrepreneur does not conflict with your employment contract, you can arrange your registration with the Chamber of Commerce. You will of course have to determine a number of things in advance: such as having a clear picture of the goods or services you want to deliver, you must decide how you will offer your goods or services and of course pricing (writing a business plan is helpful in this regard). You must also determine your company name in advance and which Legal form your company will take (for self-employed people or freelancers this is a sole proprietorship). Once you have a clear picture you can log in to the website of the Chamber of Commerce with DigiD to submit your application and  make an appointment at a Chamber of Commerce office in your region. This is where your registration becomes final and the Chamber of Commerce informs the Tax and Customs Administration that your company is registered. You will receive a confirmation of this from the tax authorities.

Tip: be sure to check whether a similar company with the name you have in mind is not already registered. This will prevent you from having to change your name or - worse - ending up in a legal conflict.

Income tax

Self-employment has consequences regarding the tax you pay on your income: The profit you make as a self-employed person is added to your annual salary and you pay income tax on this amount. Because your income as a self-employed person is on top of your income from employment, it is quite conceivable that you will be taxed in a higher tax bracket for your work as a self-employed person. Keep this in mind and reserve part of your profit for the tax assessment. Question: will only the self-employed part be taxed more, or will everything you earn as an employee and as a self-employed person go into a higher tax bracket? In other words, will part or all of it be taxed more heavily?

Sales tax (VAT)

As an entrepreneur, in most cases you have to deal with VAT. In general, you pass on the VAT you pay to your customers. You charge a percentage of VAT on your products or services and pay it to the tax authorities. The most commonly used VAT rate is 21%. (but check just to be sure which rate you should charge on your invoices]. You add 21% of the invoice amount to the costs you charge and your customer or client pays the invoice amount including VAT. You then pay the VAT received to the Tax and Customs Administration. Usually you file a VAT return every quarter, the Tax and Customs Administration will inform you of this. You can file the VAT return yourself, or outsource to an accountant.

Payroll tax and tax credit

One important thing to know if you are going into business while also having a salaried job, is that payroll tax credit applies to employment and entrepreneurship. This is in contrast to payroll tax, which only applies to income from employment. The higher your total income is, the lower your payroll tax credit will be. Is your income going up because of your activities as an entrepreneur? Then your payroll tax credit will go down.

Are you entitled to benefits and would you like to start your own business? Then it is important that you contact the UWV before you take any steps, to discuss what the consequences may be for your benefits or whether you are eligible to receive help or guidance. If you receive social assistance benefits, contact your municipality to check how you can combine this financially.

In conclusion

Now that you know the basics of combining paid employment with entrepreneurship there are a number of  other things you will have to consider. For example, are there insurance policies required for your business? You can find out more here from the KVK (Chamber of Commerce). You may also be entitled to certain entrepreneur's deductions. These are deductions offered to make entrepreneurship more appealing from a tax perspective, such as the self-employed deduction and the start-up deduction. Read more about that here (In Dutch). Also, don't forget that as a self-employed person you are obliged to keep records and arrange any pension accrual yourself. Finally if you want to avoid being seen as in false self-employment make sure you meet the criteria for independence by checking here with the KVK.

Want to know more?

General information about starting your own business is available here from the Chamber of commerce. A good place to start - if you are considering starting a business in addition to your job - is to check your employment contract. If in doubt about the legal consequences, consult with your employer or an independent advisor. Want to take the plunge? This is The home page for people who want to register their company with the Chamber of Commerce. Would you like to take a look at the registration procedure? In this video it is explained step by step (in Dutch). In some cases, you may be registered as an entrepreneur, but you are not considered as such for tax purposes. Do the Entrepreneur check (in Dutch) from the Tax and Customs Administration to see if this applies to you. If you need advice or have any questions feel free to contact us. We are happy to help you move forward.