Self employed and employed how much tax would I pay?

I'mcomingbackasaman

Does anyone know:
If you work as an employee for 36 hours a week and pay basic rate tax, NI contributions, pension but also do self employed work say 10 hours a week, would the self employed work be liable for 40% tax as a second job. Also would the NI contributions paid on the first job cover the second job as well or would NI contributions increase as well?

Greatful to anyone who knows the answer to the above as I'm hoping to do some self employed work from home to supplement my income and help to reduce the length of my mortgage by paying more each month.

Aark

Income tax:

Your self-employment profit will be added to all your other taxable sources of income for the tax year. If the total after deducting the personal allowance (£5,225) exceeds the basic rate band (£34,600) then 40% tax will be payable on the excess. However, if your aggregated income is within the basic rate band then only 22% tax will be payable on all the self-employed profit.

National insurance contributions:

Class 2 NICs of £2.20 per week will be payable unless your profit will be less than the small earnings exemption (£4,635 per year).

Class 4 NICs are also payable on profits over £5,225 per year, at a rate of 8%.

I'mcomingbackasaman

Thanks Aark, that sorts out the Tax and Insurance.
would I let the IR know about my self employed work before I begin it in case there are forms to fill in or as soon as I've earned income from it, and do you know if you still purchase NI stamps from the Post Office or is there another method now?

Bean_Counter

I'mcomingbackasaman wrote: »

would I let the IR know about my self employed work before I begin it in case there are forms to fill in or as soon as I've earned income from it, and do you know if you still purchase NI stamps from the Post Office or is there another method now?

You have three months following the end of your first month of trading to let HMRC you have started. I wouldn't worry too much about registering early because of forms. You may want to register when you start incurring costs to include them in your returns in due course.

As far as I am aware, NI stamps from the post office are long gone. Class 2 NI is paid by quarterly direct debit (HMRC will send you a form when you register) and class 4 NI is collected at the same time as your income tax via the self-assessment.

I'mcomingbackasaman

Thanks Bean Counter, I rang the IR today and got some more information. As soon as I start self employed work then I register and do my books/keep receipts to hand in at the end of the financial year they've said and to add my employed work to it to get the total income earned for the year like Aark said earlier. I've been self employed before so I'm not 'new' to it. Just not self employed and employed at the same time. I'm just making a list of eligible tax concessions like Broadband etc. and buying a cash book when I've took some work on (meeting next week cross your fingers!)

Bean_Counter

I'mcomingbackasaman wrote: »

I've been self employed before so I'm not 'new' to it. Just not self employed and employed at the same time. I'm just making a list of eligible tax concessions like Broadband etc. and buying a cash book when I've took some work on

I don't know if you are employed and self-employed in the same line of work, but since you have been self-employed before, you will know that it is easier to claim expenses against your self-employment than it is against your employed income.

If they are both similar, the sooner you register the sooner you can claim deductible expenses in the name of your self-employed business that you might use in your employment as well.

Hope that made sense. Tried to rewrite it but didn't come out any better.

Let me know if you wish more information.

daisychain13

Hello,

I am hoping you may be able to help me - I have been trying to understand this for a while by reading all the government information available and have been getting a little confused (well, actually very), hopefully it looks like money saving expert and the very clever people on the forum will come to the rescue again :T.

I have been looking at the possiblity of starting my own business but with a rather large mortgage I dont want to jump in with both feet and was hoping to keep my current full time job on for a bit while a I build up a client base. Does this mean I will have to pay NI classes 1, 2 and 4 and I am a little unsure as to how this will affect my tax if both my full time employment salary and the earnings from my own business fall below the threshold?

Thanks - sorry for the long question!
Daisy

Bean_Counter

daisychain13 wrote: »

Hello,

I am hoping you may be able to help me - I have been trying to understand this for a while by reading all the government information available and have been getting a little confused (well, actually very), hopefully it looks like money saving expert and the very clever people on the forum will come to the rescue again :T.

I have been looking at the possiblity of starting my own business but with a rather large mortgage I dont want to jump in with both feet and was hoping to keep my current full time job on for a bit while a I build up a client base. Does this mean I will have to pay NI classes 1, 2 and 4 and I am a little unsure as to how this will affect my tax if both my full time employment salary and the earnings from my own business fall below the threshold?

Thanks - sorry for the long question!
Daisy

Hi Daisy,

Yes, you would pay class 1 NI on your employment, and class 2 and class 4 NI on your self-employed income. Class 2 is paid by quarterly direct debit and class 4 is paid with your income tax through self-assessment. There is a maximum level of NI contributions, where you can apply not to pay any more, and also a minimum level where you can apply for class 2 NI exemptions, but these are at a low level.

Regarding income tax, you would then fill in a self-assessment return. You would put on your earnings from your employment and your self-employment and calculate the tax payable on your total income. You would then deduct any tax already paid through PAYE to get to the balance of tax payable.

Hope this helps. Let me know if you need more information.

roger56

Bean_Counter wrote: »

Hi Daisy,

...... Class 2 is paid by quarterly direct debit and class 4 is paid with your income tax through self-assessment. ........

Class 2 is paid monthly by DD.

nealnomoney

Can i offset a self employment loss against emloyment income ?

Bean_Counter

roger56 wrote: »

Class 2 is paid monthly by DD.

Apologies, quite right. Got confused with the quaterly bill method my sister uses!