Tax and a 2nd Job

Janets_Daughter

Hi Everyone,

I would very much appreciate any advice anyone could give me on this matter.

I am currently in full-time employment earning £26,304 and am considering taking on a second job (at night) that pays £25,000 to help me save up for a deposit. But I'm rubbish at working out tax.

My question is how much tax would I have to pay?

I'm just trying to work out how much money I would clear monthly.

Many thanks

Merlin_Accounts

Hi

The total income from your two jobs will put you into higher rate tax (40%) by approx £11k. You will also become liable to higher rate tax on the gross value of any interest received on your bank/building society accounts (you pay 20% at source so would be liable to a further 20%). Likewise if you receive any dividends these will be taxed on their gross value at 32.5% (25% of the net value of the dividends).

The way PAYE works you would, initially, go onto a BR tax code on your 2nd job - you will need to complete a P46 for the employer and tick statement C on the form. A BR tax code means you will pay 20% tax on all of the pay from the 2nd job. It would of course be wise to inform the tax man straight away so that your tax code can be adjusted to reflect the fact that your total income will be so high - if you dont you will build up quite a substantial tax underpayment.

In addition to tax you will have nat ins to pay in the 2nd job. Assuming it is unconnected with the 1st job (ie not same employer) the first £453 per month of pay from the 2nd job will not be liable to nat ins. After that you will pay 11%.

As you are already paying nat ins on your 1st job, and the level of earnings from your 2nd job is similar, you would end up paying more than the maximum Class 1 nat ins than you should. You should therefore contact the tax office to also see about making an application to defer payment of nat ins (a while since I did one but I seem to recall that you have to apply ahead of the start of the tax year you want it to be effective from). If you end up overpaying this tax year you should be able to make a claim for a refund of overpaid nat ins.

Hope this helps.

CLAPTON

Because you are only about to start your second job then you will earn, at most, an extra 10.4k this tax year (i.e. 5 months worth of 25k) so you will not need to pay 40% tax this year, so a BR code will be correct.

Next tax year, however, depending upon the budget (which will change the tax bands) you may be liable for 40% on some of your income.

Janets_Daughter

Thank you Merlin Accounts and Clapton, you've made everything so much clearer!

Merlin_Accounts

Its a pity the 2nd job is as an employee for someone else. If you were doing it as self employed you could actually consider setting up as a Limited Company - with a bit of judicious planning you could save yourself quite a bit of tax. There are lots you would need to know before you did something like that though (and its too late in the evening to write the book, lol).