2nd Income how much tax will I pay?

KLAXTER

Hello all,

I am hoping for some advise here please.

Here is my situation:

I work full time employed, & earn £16.500 a year.

My additional income is expected to earn me £8000 a year. (Can vary due to value of Bitcoin/Altcoins)

I am soon about to earn additional income through mining Altcoins (cryptocurrency). Related to Bitcoin. My computers are set up to mine coins which I then exchange for Bitcoins which will then be exchanged for £GBP.

The ammount I earn from mining each month can vary, but according to calculations my income from mining alone should be around £800-£12000 a year. Depending on market price, this is a volitile market & it could easily go as low as £1,000-£2000 or as high as 6 figures (if Bitcoin increases in value as it did last year).

From my understanding, this will be seen by HMRC as additional income & I will be taxed accordingly with income tax.

My questions are:

1.) If I start earning after Jan 31st I will have up until the 31st Jan next year to complete an online self assesment?

2.) What % of income in tax I will be paying if I earn x ammount. Is it 20%? 40%? I suppose this depends on how much I make right? Some estimates would be good at this point.

Any help on clarifying this would be most appreciated, my estimate is that my income this year will be:

Job: £16500
Mining: £8000

Many thanks

00ec25

the tax year runs from 6 April - 5 April

so if you are "starting" on 31 Jan the period until 5/4/14 falls in the 13/14 tax year and you have until 31 Oct 14 to file a tax return if submitted on paper or until 31 Jan 2015 if done on line. Your income from 6/4/14 to 5/4/15 is due on your 14/15 tax return for submission by 31 Jan 2016 at the latest

you could look the tax brackets up yourself but to save you the effort
Income Tax only: http://www.hmrc.gov.uk/rates/it.htm
For 2013/14
0 - 9,440 pa = tax free
9441 - 32010 = 20%
32011 - 150,000 = 40%

in other words you pay 40% tax on the excess of your earnings over £42,450 pa
so on your figures : Ttotal earnings 16,500 + 8,000 = 24,500
tax 24,500 - 9440 = 15,060 @20% = 3,012. Net pay therefore 24,500 - 3012 = 21,488 *

For 2014/15 the personal allowance increases to 10,000 and the start point for 40% drops to 41,865

* Do not forget you also have to pay National Insurance

KLAXTER

Thank you, that helps a lot!

I will keep 20% back then, at least now I can budget.

I tried looking on the HMRC website but got so confused I thought asking here would be a better option!

Thanks again

KLAXTER

I always thought that a 2nd job/income came under a higher tax bracket to your regular job?

00ec25

KLAXTER wrote: »

I always thought that a 2nd job/income came under a higher tax bracket to your regular job?

your total income is what you pay tax on not how you earn it, so NO

CLAPTON

you need to declare earning (and pay) for tax year 2013 -14 (i.e. 6th april 2013 and 5th april 2014) by 31 jan 2015


based on earning of 16,500 + 8,000 = 24,500 you will comfortably be a standards rate tax payer

so tax 20% of 8,000 = 1,600
plus class 2 NI at £2.7 per week
and class 4 NI at 9% over 7,755 i.e. 9% of 245

you need to register with HMRC once you make any money and then pay class 2 NI by DD quarterly

CLAPTON

KLAXTER wrote: »

I always thought that a 2nd job/income came under a higher tax bracket to your regular job?

your tax free allowance of 9445 is used against your PAYE job so you pay 20% against all of your second income so it does appear you pay more in proportion

KLAXTER

Thank you all, very helpful.

KLAXTER

Could anyone provide me the correct link for me to sign up NIC and what else I need with HMRC?

I looked on there, and it mentioned registering as a business only so I got confused lol.

Thank you

KLAXTER

Also, with the nature of Cryptocurrency it is nigh on impossible to keep a record of £ ammounts as everything is denominated in the crypto currency itself not in sterling.

It is only when you cash out & exchange it to Sterling that you can see the value.

What exactly do I need to keep for records?

The nature of currency trading crypto currencies is a very new thing & there seems to be no set rules anywhere.

What do HRMC look for when 'record keeping'? - Do they need to know every single transaction (can often be 100's a day, very hard to track/calculate value)

OR do they only look for when it is converted to GBP?

The process goes like this:

Mining altcoin with computer->convert to Bitcoin->Exchange for GBP->Transfer to bank

I imagine it will be looked at as Currency trading? I have no idea.

Thanks again