Employed, PAYE, Business on the side and Tax

hgotsparkle

I need some help...
Basically, I'm employed, on NMW which I can't live on, OH is soon going self employed so no idea what his pay will be like but hopefully more than he his on now, being on the books.
I don't want to declare myself self employed over this in case it doesn't work out, but as I'm qualified in applying, maintaining and removing Gel nail extensions, I would like to do this alongside working full time.

Is there a way I can do this (as obviously I'm not going to do it as undeclared) without making myself self-employed?

What do other people do with regards to tax that are employed by a company but do, say, hairdressing or whatever as extra income?

InsideInsurance

hgotsparkle wrote: »

I need some help...
Basically, I'm employed, on NMW which I can't live on, OH is soon going self employed so no idea what his pay will be like but hopefully more than he his on now, being on the books.
I don't want to declare myself self employed over this in case it doesn't work out, but as I'm qualified in applying, maintaining and removing Gel nail extensions, I would like to do this alongside working full time.

Is there a way I can do this (as obviously I'm not going to do it as undeclared) without making myself self-employed?

What do other people do with regards to tax that are employed by a company but do, say, hairdressing or whatever as extra income?

You either register as self employed or illegally avoid paying tax and risk ultimately a criminal record etc. Now you may question the chances of you being caught but others here are not going to advocate anything illegal.

The simpliest method is simply to register with HMRC as self employed and do your annual tax return. In one area of the form you enter your PAYE income and tax/ ni already paid and on the other you enter your revenues and costs of your self employed work. It then adds your profits to your income calculates the total tax due and nets off what has already been paid to give you the final figure that you owe or is owed to you. Simples.

If you really want to avoid the "self employed" label for some reason then you have to register a limited company for which you are the director and you then have two jobs which are both PAYE. The paperwork for Ltds are ten times that of being self employed and there are additional fees that are payable. It'd be a crazy thing to do but is the only realistic legal alternative

hgotsparkle

InsideInsurance wrote: »

You either register as self employed or illegally avoid paying tax and risk ultimately a criminal record etc. Now you may question the chances of you being caught but others here are not going to advocate anything illegal.

The simpliest method is simply to register with HMRC as self employed and do your annual tax return. In one area of the form you enter your PAYE income and tax/ ni already paid and on the other you enter your revenues and costs of your self employed work. It then adds your profits to your income calculates the total tax due and nets off what has already been paid to give you the final figure that you owe or is owed to you. Simples.

If you really want to avoid the "self employed" label for some reason then you have to register a limited company for which you are the director and you then have two jobs which are both PAYE. The paperwork for Ltds are ten times that of being self employed and there are additional fees that are payable. It'd be a crazy thing to do but is the only realistic legal alternative

I'm not even considering avoiding tax, thats just stupid.

I just wondered if theres a way that you can do it without having to do a tax return on my full time earnings from being employed.

I know people do offer services such as nails, tanning, hair, all legally and work full time too, I just wondered how they do it.

I want to try and avoid the self employed label, if at all possibl due to saving for a mortgage deposit and not wanting both of us to be down as self employed, as I know this will be a lot more difficult for us.
If there is no way of doing this, then I will just have to make do with my earnings from employment.

InsideInsurance

hgotsparkle wrote: »

I'm not even considering avoiding tax, thats just stupid.

I just wondered if theres a way that you can do it without having to do a tax return on my full time earnings from being employed.

I know people do offer services such as nails, tanning, hair, all legally and work full time too, I just wondered how they do it.

I want to try and avoid the self employed label, if at all possibl due to saving for a mortgage deposit and not wanting both of us to be down as self employed, as I know this will be a lot more difficult for us.
If there is no way of doing this, then I will just have to make do with my earnings from employment.

Legally, you are either an employee or self employed, there is no third option. So either you find a way to do this additional work as an employee (eg set up your own ltd company, work for someone else etc) or you register as self employed.

Being self employed and/ or doing tax returns is not a bad thing, it takes very little time as long as you keep your books straight and when I used to do it it always generated a tax refund.

For a mortgage application you would declare both your sources of income so that would be one PAYE job and one self employed job. Even if you did the Ltd route most banks treat it Director/owners differently and its more akin to SE than PAYE

I'm also confused by your concerns. You say you are earning NMW and arent sure your new venture will make much money. Presumably the main income for your mortgage application therefore will come from your partner who is SE anyway in which case the application is going to be tarred by the SE brush irrespective of if you're getting a bit of side income coming in as SE or not anyway

hgotsparkle

InsideInsurance wrote: »

Legally, you are either an employee or self employed, there is no third option. So either you find a way to do this additional work as an employee (eg set up your own ltd company, work for someone else etc) or you register as self employed.

Being self employed and/ or doing tax returns is not a bad thing, it takes very little time as long as you keep your books straight and when I used to do it it always generated a tax refund.

For a mortgage application you would declare both your sources of income so that would be one PAYE job and one self employed job. Even if you did the Ltd route most banks treat it Director/owners differently and its more akin to SE than PAYE

I'm also confused by your concerns. You say you are earning NMW and arent sure your new venture will make much money. Presumably the main income for your mortgage application therefore will come from your partner who is SE anyway in which case the application is going to be tarred by the SE brush irrespective of if you're getting a bit of side income coming in as SE or not anyway

My OH isn't doing too badly at the moment, and we survive on mostly his income and then mine is a top up, but if he doesn't get much work in once he's SE, then it will be mainly my income supporting us (he's in the building trade so it does tend to be seasonal), if he did well, great, I'd pack in my job and just do the nails as somethig to do, and a way to earn once we decide to have a family but I'm not willing to take that risk just yet as obviously, we don't know how it is going to be for him until he's got a few years behind him, 3 in terms of mortgage.
We've spoken to a mortgage advisor about this and they have said that 2x SE on a joint mortgage application is harder to approve than 1 SE and 1 employed.

If there is no feasible option just yet, than I will have to stick with the NMW job (which I hate) for a few year and then consider it alone in a few years once we know where OH stands with regards to his success.

InsideInsurance

hgotsparkle wrote: »

We've spoken to a mortgage advisor about this and they have said that 2x SE on a joint mortgage application is harder to approve than 1 SE and 1 employed.

I'd double check your mortgage advisor has correctly understood that this would be a secondary income on top of your PAYE and so it becomes one employed, one self employed and a secondard self employed. Having additional income, irrespective of source, shouldnt worsen your application.

DabberWilf

Hello, I have a question that is related to the OP question.
I am employed full time and run a Limited company "on the side".
I pay an accountant to handle paperwork and returns and currently pay occasional dividends to myself as sole shareholder.
I would like to look at hypothetical numbers for leaving the day job and pursuing the Limited company full time.
Could you point me to a web site that will work out any tax/NI calculations based on me paying myself through PAYE with a fixed monthly income?
EDIT: Apologies this question is aimed at InsideInsurance as you seem to know what you are talking about

I hope you don't mind me hijacking this thread but I thought it may be relevant to anyone else searching for this info.

InsideInsurance

DabberWilf wrote: »

Could you point me to a web site that will work out any tax/NI calculations based on me paying myself through PAYE with a fixed monthly income?
EDIT: Apologies this question is aimed at InsideInsurance as you seem to know what you are talking about

If its going through PAYE then your directorship is irrelevant and you can use any take home pay calculator by annualising the monthly payments eg http://www.thesalarycalculator.co.uk/salary.php

Unless you are definitely inside IR35 this would be a very odd thing to do, most will pay themselves as little as they can through PAYE just to ensure their NI contributions are there and then take the rest out either as dividends or by periodic dissolving the company to try something new (the later risks being accused of having a phoenix company if the "new thing" is too similar to the original company but there are plenty out there giving advice on how to reduce this risk)

If you are at risk of IR35 but believe you are outside then you may pay a bit more PAYE etc to possibly try and divert interest from yourself to someone who is really stretching things.

DabberWilf

InsideInsurance wrote: »

If its going through PAYE then your directorship is irrelevant and you can use any take home pay calculator by annualising the monthly payments

Unless you are definitely inside IR35 this would be a very odd thing to do, most will pay themselves as little as they can through PAYE just to ensure their NI contributions are there and then take the rest out either as dividends or by periodic dissolving the company to try something new (the later risks being accused of having a phoenix company if the "new thing" is too similar to the original company but there are plenty out there giving advice on how to reduce this risk)

If you are at risk of IR35 but believe you are outside then you may pay a bit more PAYE etc to possibly try and divert interest from yourself to someone who is really stretching things.

That's great. Many thanks.

So potentially a salary of £10k to fall within my allowance for income tax and then dividends to make up the shortfall (based on my personal bills / outgoings) per month.

What rate of tax would I pay on a dividend?
I imagine in my first year I wouldn't generate more than £41k in revenue if that is relevant.

Many thanks for your help.

InsideInsurance

DabberWilf wrote: »

That's great. Many thanks.

So potentially a salary of £10k to fall within my allowance for income tax and then dividends to make up the shortfall (based on my personal bills / outgoings) per month.

What rate of tax would I pay on a dividend?
I imagine in my first year I wouldn't generate more than £41k in revenue if that is relevant.

Many thanks for your help.

Id get someone better at accountancy than me to explain it to you properly but effectively the corporation tax already paid on the profits is factored into the tax you pay on the dividends. So roughly speaking if you are a basic rate tax payer there is no further tax to be paid, if you are a higher rate tax payer then you pay 20% on the element above the basic rate.

Obviously the key advantage is no National Insurance is due at all on the dividends.