Working from home - Tax

Rachylou1981

Hi everyone

I have a full time job and I am going to start working from home doing admin work (totally separate from my main job). I can do as much as I like so am probably going to try to make £100-300 per month and so can say no more than £3600 per annum.

Obviously I get my personal allowance on my main job and will need to declare this separately. I have read so much on the internet and being honest, its all jargon and confusing to me.

Can someone advise me what the best way to sort this is? I did read somewhere that my incomes from both could be added together and a new tax code given so my tax is calculated from that. If I can avoid doing a tax return every year then I would prefer that method.

Wanted to try getting advice here before ringing tax office and sounding confused and unsure

McKneff

Tax return on your 2nd job will have to be done on a tax return.

No, income is not added together.

You have one tax code which is now applied to your main job.

If this is taken up with your full time salary, you will pay 20% tax on the whole of your second job income. Less any allowable expenses of course.

Ring the HMRC up for clarification.

Rachylou1981

Thanks for the reply.

I cannot find the info I read yesterday but this is what I am referring to:

Sharing your Personal Allowance if you pay tax on your main job

You can choose to share your Personal Allowance across more than one job or pension even if your allowances would normally be used up through the main source of income. However if you do this the amount of tax you pay won't change - but it may be simpler for you to pay the tax that you owe against only one wage.
Example: your Personal Allowance is £9,440 (tax year 2013-14) and you have PAYE income from two jobs - income of £16,000 from your main job and income of £500 from your second job. You can tell HMRC to use £500 of your Personal Allowance against your income from your second job so that you receive it free of tax and use the remaining £8,940 against your income from your main job.

googler

Is the work from home an Employment or Self-employment? If the latter, it warrants a separate tax return from your 9-5 job

The sharing quote you posted implies that this is only applicable if you have PAYE (Pay As You Earn) income from two sources; is someone, an employer, taking tax off your 'salary' for the evening work?

Rachylou1981

googler wrote: »

Is the work from home an Employment or Self-employment? If the latter, it warrants a separate tax return from your 9-5 job

The sharing quote you posted implies that this is only applicable if you have PAYE (Pay As You Earn) income from two sources; is someone, an employer, taking tax off your 'salary' for the evening work?

It is employment as I will be working for a company. I have been told that I need to sort my own tax out though.

The two jobs are not the same employer.

Rachylou1981

Also, if I did a separate tax return, would I just be taxed on what I made or would I have to declare a certain amount like the example I gave above and work up to that? Obviously I won't know how much I can do or will want to do and I get paid per line I do so will take alot of working to make up a decent amount.

McKneff

No point in splitting the tax over 2 jobs. This is only feasible if you don't earn enough in your first job to take up your allowance.

ie if you earned 2 x £100 you would split your allowance over 2 of them then, but both would have to be on a PAYE Employed basis.

If your main job takes up all your allowance then you just leave it there.

Looks like on the 2nd job you are self employed anyway so its a tax return.

googler

Rachylou1981 wrote: »

Also, if I did a separate tax return, would I just be taxed on what I made or would I have to declare a certain amount like the example I gave above and work up to that? Obviously I won't know how much I can do or will want to do and I get paid per line I do so will take alot of working to make up a decent amount.

Your personal allowance is the allowance for you, not for each individual employment, so if your earnings in 9-5 work are already over the tax-free personal allowance, i.e. £9,440, and you're paying 20% tax on (your earnings less 9440), then any other earning from the self-employment are also taxed at 20%, until your total earnings reach the next tax rate band.

So, whatever the home work employer has contracted you for, you get 80% of.

How do you determine if this admin work is employment or self-employment?

http://www.hmrc.gov.uk/employment-status/

McKneff

You musnt forget either if you earn over a certain amount of money, I think its around £149 ish, a week, you would also pay NI.

Lil_Me_2

I have a PAYE job where I earn over the personal allowance and I am SE on top. I have to submit a tax return each year, it's very easy, just fill in total income and total expenses.

Any work that I do from April 2013-April 2014 will get submitted in my tax return due in January 2015. HMRC give me the option to pay any tax I owe out of my PAYE work, so they will adjust my tax code for the year April 2015-April 2016 and I will spread the payments across the 12 months, much easier to manage.

In addition to this because I earn less than £5,725 being SE I applied for an exemption so I don't have to pay any extra National Insurance (Certificate of Small Earnings Exception).

John424

You need to declare both employed and self employed on your tax return, keep back 20% of any new income from your job for tax. Don't try messing with your tax code, it's irrelevant, it's just a collection mechanism by HMRC and only loosely follows what you should be paying in tax. Overs and unders are corrected each year through your tax return where you will submit dues as well.