Tax conditions when you are self-employed and salaried

1. Salaried and self-employed at the same time

When you choose to combine two different working lives – as an employee and self-employed – it can provide a more secure and calm start to your freelance career.

But as I said, there are various administrative things that you should be aware of in such a situation.

Approval from your employer or your A-kasse

When you start your freelance business as an employee, it is important that you are aware of whether this will require acceptance from your current employer or possibly your A box, if you are on daily allowance.

It may seem obvious that start a freelance career within the industry where you already have experience from your salaried job.

But you must be aware of your employment contract and whether there is a duty of loyalty therein.

If so, you as an employee will not be able to start up as a self-employed person within the same profession if you end up being a competitor to your current employer in any way - unless of course your employer has approved this.

Check your contract to make sure you have first received written approval of your new side job from your employer to avoid complications later.

This relationship with your employer is also called duty of loyalty. It will save you unnecessary headaches if you start by finding out whether there is already a delicate relationship here from the start.

Competition and customer clause

A non-competition clause is a provision in an employment contract that limits an employee's ability to work for competing companies or start their own business in the same industry for a certain period after termination of employment.

The purpose is to protect the employer's trade secrets and customer base.

The clause typically comes into effect when employment ends, and its duration and geographic scope vary depending on the terms of the contract and local law.

The validity of a non-compete clause depends on it being reasonable and not unreasonably limiting the employee's future job opportunities.

A customer clause and a non-competition clause can each apply for a maximum of 12 months. If they are combined, they can apply for a maximum of 6 months. (Source: IDA)

2. Tax conditions as an employee and self-employed

An independent freelancer full-time with a registered sole trader normally pays B-tax.

As an employee, on the other hand, you pay A-tax, where the employer is responsible for reporting this.

As soon as you start your own business, it is your own responsibility to keep track of the tax situation.

So what do you do if your main occupation is your salaried job and you have set up a business on the side as a side job or vice versa?

Tax as an employee and self-employed

As an employee and self-employed at the same time, you will have more than one income.

It is therefore important to keep track of your tax cards so that you know which income must be registered on which card.

Fortunately, it's quite simple!

We all have three tax cards; free card, main card and secondary card. We choose to disregard free cards this time, as this is automatically used.

Main card – your primary income

Your main card is the tax card that must be used for your primary income - i.e. where you earn the most.

If you earn most from your salaried job, it is this income that must go through the main card.

If your freelance business grows larger, or if you end up having your business as your primary source of income, it is the profit from that that must be drawn on the main card instead.

You can only have one income to run over the main card, which must be the largest of the incomes, in contrast to the secondary card, where you can register several different incomes.

Secondary card – Other income and secondary employment

The bi-card is used when you have more than one income at the same time. Here you can register all your other income, which is not your primary income, such as side job.

A popular question we have come across is whether you are subject to a restriction on your income via the bi-card. When you use your secondary card, you cannot use your tax deduction, but there is no ceiling on how much you are entitled to earn.

If you are an independent freelancer as a part-time job, it is therefore this tax card that you must use for the income from it – and vice versa if your salaried job is your part-time job.

So the secondary card is for all other incomes – i.e. those that are not your primary.

You can read more about the three tax cards on the Tax website, where you can also see your cards digitally in the self-service.

3. Personal deductions, social security contributions and deduction percentage as self-employed and salaried

The personal deduction, which is a certain amount you can earn annually without having to pay tax on it, remains the same whether you are self-employed or an employee.

The Am contribution on 8% of your income before tax is also the same for both employees and the self-employed. As a self-employed person, the am contribution will automatically be included in your B tax rates when you correct your advance statement.

Tax conditions are individual, and the draw percentage may therefore vary. But in a normal salaried job, in most cases you pay between 32-38% in tax, while the deduction percentage for the self-employed is usually between 39-43% in tax.

The Danish tax system is progressive, which means that the more you earn, the more you have to pay in tax.

If you are both employed and self-employed at the same time, there is therefore a good chance that your income will be higher than before, and thus you will most likely also have to pay a little more in tax.

However, this is based on your income, and by filling in the advance statement with your expected income, you can quickly get an overview of this.

Combinator and unemployment benefits: what you need to know

If you go from being an employee to being self-employed, and you are registered with an unemployment fund and receive unemployment benefits, special rules apply when you also run a business. independent business.

As a general rule, unemployment insurance funds consider self-employment as an activity that can affect your unemployment benefit entitlement. If you register a CVR number, your unemployment benefit period will generally be shortened to 30 weeks. This applies even if your business does not yet have a turnover.

Instead, do you use a solution like Factofly, you are technically an employee in a project employment. This means that you keep your ordinary unemployment benefit period of 104 weeks. Your hours and income are reported to the Danish Tax Agency as unemployment income, and the unemployment insurance fund automatically draws the information from there.

Important: The rules are administered differently by the individual unemployment funds, and the Danish Social Insurance Board has in recent years dealt with cases affecting this area. Always check with your own unemployment fund before you start invoicing, regardless of which solution you choose.

You can read the general rules on self-employment and unemployment benefits at citizen.dk and star.dk.

4. Your options to easily be a combiner

When you have made the choice to supplement your income as a combiner, you do not need to jump into the jungle to register CVR number, and establish a business account, take out various insurances and find a bookkeeper.

The time when you had limited options is (thankfully) over, and today you can choose not to start your own company at all, and at the same time send professional invoices to your customers.

Factofly is your shortcut to a CVR number, and ensures that the only thing you have to focus on is making your customers happy.

Factofly works both with a social security fund, but also if you need to get paid alongside your "real" job.

Everything is taken care of for you: you are insured during work, you become a project employee for your task and can act as a private individual. That is for example, you also do not need to set up a business account.

You can read more about how Factofly can help you on his way to life as a combiner.

5. When are you a combinator?

To be combinator means that you are both an employee and self-employed at the same time.

You can be considered a combinator when you have a permanent employment relationship, but at the same time run an independent business on the side.

To be considered a combinator, you must meet certain criteria for both roles:

As an employee: You must enter into an employment relationship where you work under the management and control of an employer, and receive pay for your work.

As a self-employed person: In addition to the salaried role, you must also run your own business. This means, among other things, that you yourself are responsible for operations and risk, and are responsible for your company's finances.

6. Checklist nyear you are a combiner