Help working out income please

Archiebear

Long time reader but not posted for a while....

Having been made redundant last Friday, I have been fortunate enough to be offered two part time jobs, both at 16 hours per week. In one of the jobs I will be employed by the organisation; in the other I will be self employed.

Forgive me if I seem a bit thick, but having always been employed by one employer full time I am now confused (easy for me)! So, a couple of questions please...

1. I've never been self employed before. What do I need to do in regards to paying tax and NI?
2. As both jobs are the same hours and for the same hourly rate, will I need to allocate my tax allowance against one job or will it not matter? If I do have to allocate which is better...the 'employed' or the self employed?

Any other (useful) tips about being self employed would be appreciated

Thanks in advance

LittleVoice

Archiebear wrote: »

Long time reader but not posted for a while....

Having been made redundant last Friday, I have been fortunate enough to be offered two part time jobs, both at 16 hours per week. In one of the jobs I will be employed by the organisation; in the other I will be self employed.

Forgive me if I seem a bit thick, but having always been employed by one employer full time I am now confused (easy for me)! So, a couple of questions please...

1. I've never been self employed before. What do I need to do in regards to paying tax and NI?
2. As both jobs are the same hours and for the same hourly rate, will I need to allocate my tax allowance against one job or will it not matter? If I do have to allocate which is better...the 'employed' or the self employed?

Any other (useful) tips about being self employed would be appreciated

Thanks in advance

Question: Is this work (the two jobs) with the same organisation?

Answers:
1 You have to register with HMRC as self-employed if you are truly self-employed. They will let you know about completing self-assessment tax returns and paying NI.
2 This depends in part on your answer to my question above.

Tip:
If you are working on a self-employed basis you want to charge a client more than you would get as an employee.

Archiebear

Hi LittleVoice

i) the two jobs are with totally separate organisations

ii) what does 'truly' self employed mean? I thought it just meant paying my own tax/ NI??

iii) I'm assuming that I need to charge more to cover my tax/NI?

LittleVoice

Archiebear wrote: »

Hi LittleVoice

i) the two jobs are with totally separate organisations

ii) what does 'truly' self employed mean? I thought it just meant paying my own tax/ NI??

iii) I'm assuming that I need to charge more to cover my tax/NI?

It's good that they are totally separate and not an employer pulling a fast one (at least not the PAYE organisation).

My reference to "truly self-employed" was that it is not just a question of someone paying their income tax and NI direct to HMRC but also that the work they are doing can really be regarded as self-employment. (For example, someone working as a receptionist who had to turn up to start work at 9 every day and stay until 5, use office equipment provided by the organisation and carry out the work in the way they were told to would never be self-employed.) As far as HMRC are concerned, there are "tests" as to what counts as being self-employed. See http://www.hmrc.gov.uk/employment-status/index.htm

http://www.hmrc.gov.uk/selfemployed/index.shtml will also provide you with information about registering as self-employed.

You should note that being self-employed means that normally you need to have more than one client - spending 16 hours (presumably on a regular basis because you describe it as a "job" of 16 hours a week) means that you don't have much time to spend with other clients.

You don't need to charge more because of tax (because your hourly rate with the employer includes an element which ultimately goes to the tax man). What you would charge extra for in addition to a notional "employed rate" is the value to the client of not paying employer's NI contributions, not paying holiday (worth at least another 12.07% of basic pay), not having a responsibility to pay sick pay, not having to pay you notice (unless you had that in your terms of business), not making pension contributions ........

Another tip:
Get your terms of business sorted - such as payment within a specified number of days from date of invoice.

And another:
Keep clear records of all your expenses and what you invoice your client(s).

Archiebear

Thank you...a very comprehensive answer! At least I'm clear now on what I need to do.

Laurajo_2

Your personal allowance will, usually be offset against your PAYE income...at the end of the tax year, you will need to complete a tax return.

In it's simplest terms, the calc will add together your taxable PAYE income from your p60 and your profit from self employment, deduct the personal allowance and calculate the tax due on this then deduct the tax paid on your employed source.