reducing tax on second job (over £100k base)

maxthepolarbear

I am fortunately enough to be earning £100k pa base in my full time job which I pay tax via PAYE. I will get a bonus of around 30-40% on top. So far I have been avoiding the 60% tax by paying into my pension. I'm close to maxing out the annual allowance.

I have started a second job recently doing some ad-hoc project works as a self employed contractor. My estimated income from this job is probably around £5k-£6k a year. This is steady work that I expect I'll be able to get every year for the next three/four years say (each year earning £5-£6k).

I am wondering whether it is worth setting up a limited company bearing in mind I don't earn much in my second income and the cost of running a limited company (although I can limit the cost by doing the accounting myself as the accounting will be very simple with few income/outgo). The only reason I am considering this is that I see no other way to avoid the 60% tax. With a limited company I could either leave my second income (after tax) in my company and then wind it down in a few years time or I could take money out by paying my partner dividend.

Are there any other more tax-efficient ways of doing this?

00ec25

you have the basic idea, but be careful of "settlements legislation" if paying dividends to a "partner" merely to avoid tax on yourself

if on the other hand you have done the decent and got legally married, you can
https://www.contractorcalculator.co.uk/settlements_legislation_s624_minimising_risks.aspx