How much tax on a second small irregular income do i pay?

Question

I am in full time employment so paying full tax and NI contributions, but have started a small second job which is freelance (so i chose when i work) and therefore is irregular, i earn anything between an extra £100-£300 a month.... i am not sure i will be doing the second job much longer but i need to know how i pay tax on this, how much tax do i need to pay and would i need to ring the Inland Revenue and register as self employed?

I have no idea about tax returns or how to fill them in as i don't have an accountant (do i need one?)

Do i pay tax on my second income next year? - And what is the best simplest way to put money aside for tax from my second income? - should i save £20 per £100 i make?

Need some good anwers please lol

Thanks !

Answer 1

Comments/answers on your other points ...

would i need to ring the Inland Revenue and register as self employed? >> Depends what you are doing in the second job. You don't say. If working for yourself then, yes, the Revenue won't necessarily know unless you tell them.

By the way, if this is the case, you MUST register within 3 months of starting otherwise you will be fined.

To register as self employed call the Revene on 08459 154515.

On the level if income you mention you seem to be entitled to claim the "small  earnings exception" ("SEE") from paying self employed national insurance, Class 2. Make sure you tell the Revenue that when you phone and fill in any forms necessary.

To get SEE every tax year it's best to apply for it in advance, before each tax year starts, unless your income (after expenses) is going to be over the SEE limit (£4635 this year, 2008/09).

I have no idea about tax returns or how to fill them in as i don't have an accountant (do i need one?) >> No you don't necessarily need an accountant or any advisor if your affairs are straightforward. You can contact the Revenue for recommendations on the procedures. You may even be able to visit one of their offices for a chat so they can explain face to face.

Don't forget that, if you are self employed, you can deduct any expenses from your income that are "wholly & exclusively" for your business and nothing else. Don't forget anything.

Do i pay tax on my second income next year? >> Yes. Next year and every year. From year 2 onwards you may also be asked to pay some/all of this in advance/up front if amounts are large enough.

- And what is the best simplest way to put money aside for tax from my second income? >> You decide. Perhaps transferring some of your income to a separate "tax reserve" account in a building society so you can get interest on  it before paying the tax.

should i save £20 per £100 i make? >> Again, the level of the reserve will be decided by a number of factors such as what the tax bill will be  when your total income is added together (as suggested above). 20% sounds like a good starting point though.

Good luck in your new venture. Hope you're successful.

Answer 2

2nd jobs are charged at a straight 20% or whatever band yr total earnings takes u into. however if u dont have an employer not sure how u go about paying the tax u need to speak to yr tax office ie that of yr main employer. address/tel no can be found on the IR website.

Answer 3

You will have used up your tax allowances with your first income, therefore anything else earned is taxable at 20p in the pound, unless it takes you over the 40p in the pound threshhold (about £35,000?).  Income Tax website will confirm.

Answer 4

As your personal allowance is likely to be consumed by job 1 you wll pay 20% for job 2 until your total income is more than 36,000 and once over this you will pay 40%