Starting 2nd job as self employed - tax and 1st job question

Rocky2511

Hi, I am in the process of starting up my own business as a part time job as well as continuing with my full time job. My first question is if I register as self employed with HMRC will they then contact my employer of my 1st job for any reason? Will there be a change in my tax code for my 1st job if I start a 2nd job? The reason I ask is because I don't want my employee to know I am starting up my own business!!

Another query I have is how do you pay tax if you are self employed? Is it all paid up in one go at the end of year in the self assessment tax return or is any tax paid monthly? It has just confused me so much, as I assumed all tax was paid at the end of year once you know your earnings and profit for the year, but just been on the HMRC website and it says 'an advantage of filling your tax return in online is that you will know how much tax you have to pay straight away and also anything that is owed to you'. If u havn't paid them any tax from a self employed job throughout the year why would they owe you anything???

Very confusing any help on this would be great:)

Hammyman

They won't contact your employer. There will be no change of tax code. Every year you will receive a self assessment form, one page is for paid employment under PAYE. On it you put the name of the employer, their PAYE code, the amount you earn, the amount of tax they deducted. You complete the page for your business as well. HMRC then add up the gross figure for your wage plus the net profit from your business which then becomes your income. They then work out how much tax you owe and deduct what you've already paid through PAYE from that amount and send you a bill for the rest. If you make a loss as self employed, you would have ended up paying too much tax through PAYE, as your income would be less than your wage, and you would get a refund.

The way you pay is that if you start in April 2010, you'd get a self assessment form in April 2011. You would then have to pay the bill for 2010-2011 by 31 Jan 2012. In addition to that, if you make a profit you pay "on account" the next years which is based on the previous years tax bill so if your tax bill is £1000 for the year 4/2010-4/2011, you would owe the £1000 plus 50% "advance" so £1500. You would also be required to pay an additional £500 in June 2012. When you fill in the tax return you get in April 2012, the "on account" payment would be taken off the bill and everything adjusted accordingly.

When they say about doing it online telling you how much you'd need to pay straight away, it means that when you get your self assessment (S/A) and do it onine in April 2011, you would get told the amount owed immediately which you'd have up to 31/1/2012 to pay. I sent my S/A in in the second week in April and just got my bill today. I know in previous years, sometimes its been as late as October. Please note that if you send it in after September, you're supposed to calculate it yourself but maybe the online application has changed that - basically its to give you more time to get the money together by 31 Jan deadline.

Remember that if you use up your tax free allowance on PAYE, all profit on self employed will be taxable at the highest rate you are taxed on and also that Class 4 National Insurance contributions will apply. In short, stick 30% of any profit in a high interest saving account and you'll have enough to cover the bill.

fengirl_2

No, HMRC will never disclose your personal information to your employer or anyone else.
The tax due on your profit is payable on 31 Jan following the year of assessment, plus half the tax due for the following year on account.
You may be owed tax if you are on PAYE and have additional allowances to claim, or you may have loss relief to claim, or be a CIS contractor - there are many reasons why a repayment may be due. But if you have paid the correct tax under PAYE, then you will just have the tax to pay on your profits.

Savvy_Sue

You need to phone HMRC ASAP, no they won't tell your employer (although if they'd have grounds to fire you if they found out you might want to reconsider them not knowing!)

Tax is calculated at the end of your first year, you'll need to do tax returns from now on. Sounds unlikely that they would owe you money, but remember that their advice applies to everyone, in every situation, rather than your specific one.

You'll also need to pay NI contributions unless you apply for an exemption if your s/e income is going to be low.

Rocky2511

Thanks for your replies. I think that has cleared it up a bit better for me. The only reason I don't want my employer to know about my own business is because it will be in the same line of work. The difference will be that my employer gets all his business from dentists where as I plan on getting business straight from the customer (cutting out the middle man). If I tell him I don't think he would be very pleased as he might feel that I am taking business off of him and treading on his toes, which I don't want to do. So as all of his work is based in one region, I plan to advertise my work across the UK, and try and stay away from his area of work, so I dont think I would be interferring or taking customers away from him. I don't think he could fire me because of this, could he??

fengirl_2

Only if there was something in your employment contract.

Savvy_Sue

Or if he could find some other reason to do so.