Tax code for 2nd job confusion

rippylufc

I have just changed my job and am working a lot less hours so I was thinking of getting a second job. I was under the impression that I would get taxed a base rate of 20% on the second job and then if I earned over £149 a week I would have have to pay an additional 12% national insurance as well. I intend to earn less than £149 a week so I don't have to pay this 12%, just the 20%.

Now, I was speaking to a friend the other day and he said that I would have pay 40% tax on my 2nd job not the 20% that I thought I would have to.

Could anyone please help and clear this up for me before I start applying for jobs? Which one would it be....40% or 20%??

If it helps the wage on my first job is £20,000 and the estimated wage on my second job would be £6,420.

Many thanks in advance.

When_the_going_gets_tough

it would be 20%

Squeaky91

It would be 20% you will have a tax code of BR shown on you payslip which effectively stands for Basic Rate so 20%. You would only be taxed 40% if you earned over £32010 in this tax year and £31866 in the next tax year.

jem16

Squeaky91 wrote: »

You would only be taxed 40% if you earned over £32010 in this tax year and £31866 in the next tax year.

40% tax rate is over £41,450 this tax year ( £9440 + £32010) and £41,865 next tax year (£10,000 + £31,865).

19lottie82

Despite it being a common misconception, you are no worse off working a second job than if you worked the same hours (at the same rate of pay) in your.existing role.

As already explained, you will be taxed 20% until your total learnings hit enough to bring you into the higher tax bracket, then anything above that will be 40%

chrisbur

In many cases you are better off with two jobs rather than one as in most cases you benefit from a second national insurance allowance.

getmore4less

19lottie82 wrote: »

Despite it being a common misconception, you are no worse off working a second job than if you worked the same hours (at the same rate of pay) in your.existing role.

As already explained, you will be taxed 20% until your total learnings hit enough to bring you into the higher tax bracket, then anything above that will be 40%

This is not strictly true, it depends on the amounts in each job and there are some where you can be worse off due to the way NI works.
for 2014-2015

Although for most people most of the time it will be a savings as it requires at least one job to be near the 40% tax band.

The tax is cumulative across both jobs so go over £41865 then 40%.

looking on the weekly numbers for NI
0% from £0 to
PT is £153
12% from this up to
UEL is £707
2% over this

(note I have not checked for > or >= but the principle is the same)

For a 1st job that is over £153pw.
A second job saves 12% up to £153 so up to £18.38
For a 1st job that is over £707pw
A second job save 2% up to £153 £3.06
( there is a transition between the £18.38-£3.06 at the pay approached £707 in the first job)

if the second job is over the £153 it starts to pay 12%

for at 1st job at £707 then the second job pay 12 % the first would pay 2% so the £3.06 that was saved is lost once the second job earns £30.60 over the £153 and then is 10% down on any more earnings in the second job.

there will be Various point where there will be savings, neutral or loss.

Not sure if someone has done the graph it will plot onto a x,y quite nicely
will have a look.

NOTE this is per pay period weekly or monthly it is not like tax that is cumulative.

edit :

Note 2: if using the HMRC tables then the are some variations as they don't use the 12%/2% exactly

chrisbur

getmore4less wrote: »

This is not strictly true, it depends on the amounts in each job and there are some where you can be worse off due to the way NI works.
for 2014-2015

Although for most people most of the time it will be a savings as it requires at least one job to be near the 40% tax band.

The tax is cumulative across both jobs so go over £41865 then 40%.

looking on the weekly numbers for NI
0% from £0 to
PT is £153
12% from this up to
UEL is £707
2% over this

(note I have not checked for > or >= but the principle is the same)

For a 1st job that is over £153pw.
A second job saves 12% up to £153 so up to £18.38
For a 1st job that is over £707pw
A second job save 2% up to £153 £3.06
( there is a transition between the £18.38-£3.06 at the pay approached £707 in the first job)

if the second job is over the £153 it starts to pay 12%

for at 1st job at £707 then the second job pay 12 % the first would pay 2% so the £3.06 that was saved is lost once the second job earns £30.60 over the £153 and then is 10% down on any more earnings in the second job.

there will be Various point where there will be savings, neutral or loss.

Not sure if someone has done the graph it will plot onto a x,y quite nicely
will have a look.

NOTE this is per pay period weekly or monthly it is not like tax that is cumulative.

edit :

Note 2: if using the HMRC tables then the are some variations as they don't use the 12%/2% exactly

I have not studied your figures closely yet but at a quick glance they do not appear to have taken account of the maximum annual NI ceiling.

getmore4less

chrisbur wrote: »

I have not studied your figures closely yet but at a quick glance they do not appear to have taken account of the maximum annual NI ceiling.

a search on HMRC brings up nothing.

chrisbur

getmore4less wrote: »

a search on HMRC brings up nothing.

The principal can be seen here though it is a bit out of date so 11% and 1% are now 12% and 2%
http://www.hmrc.gov.uk/manuals/nimmanual/NIM01163.htm

When an employee knows this is going to happen they can apply to defer payment of some of the NI and only pay 2% on all earnings over the threshold. These are the notes for the deferment application which gives details of earnings that are likely to benefit from deferment
http://www.hmrc.gov.uk/forms/ca72a-notes-14-15.pdf
There would probably be a bit to pay at the end as the maximum NI liability is always done as a 53 week year.
There are some more details about it here
http://www.niconsultancy.co.uk/article11-04.htm

getmore4less

Thanks, got it, IIUC makes my previous post redundant.