Tax on second job

thisisbecky

Hi all, newbie lurker here and am unsure if this is the right sub-forum to post this - please let me know if I need to move it.

Essentially I wondered how tax works on second jobs? Let's take the following example:

Let's say I have a full-time job (job 1) with a salary of around £34k, which is taxed at normal amount. Then let's say I get another job (job 2), 12 hours a week on a pro rata wage also of £34k pa. The tax on second job would be at 20%, right?

Because the total amount of income on both jobs annually would exceed the 40% tax threshold, would that mean that I would then be taxed at 40% on job 1? Would I also be taxed at 40% on job 2 too? Or would I remain at standard tax on job 1 and 20% on job 2, regardless of total amount earned with them combined?

Essentially I'm trying to work out whether to bother getting a second job in order to reduce debts but I'm absolutely clueless with tax related stuff.

Can anyone help?

Thanks

DrEskimo

It doesn't change the tax you pay on your entire salary, just on any income above the predefined tax thresholds (currently £0-£11,850 = 0%; £11,851-£46,350 = 20%; >£46,350 = 40%)

Extra income will always be advantageous. Whether it's taxed at 0%, 20% or 40%, you will always have more money!

On job 1, the first £11,850 will be 0% tax. This is your personal allowance. The remaining £22,150 will be taxed at 20%. If you take on the second job and earn £34k as well, then this is just added on to your earnings in job 1 and taxed accordingly. So the first £12,350 will be taxed at 20%, and then the remaining £21,650 will be taxed at 40%.

Its even easier if you just treat all your earnings as one, so in this case a total earning of £68,000. Again, first £11,850 is 0% tax, £11,850-£46,350 is taxed at 20%, so that's (£46,350-£11,850) £34,500 at 20%, and the remaining amount over £46,350 threshold (£68,000-£46,350), which is £21,650 is taxed at 40%.

As you can see, I arrive at the same numbers either way I cut it, which is £11,850 0%, £34,500 taxed at 20% and £21,650 taxed at 40%.

If the second employment is self-employment you will have to submit your own self-assessment tax returns, and are also responsible for paying additional national insurance (class 2 and 4), and additional student loan payments if you have a plan 1 or 2 student loan.

But to answer your main question, yes additional income will be helpful in reducing debts. You may not get as much extra as you would like, but it will always be more money. Essentially you are just doubling your income in your example.

jinkssick

I am in a similar situation, I have a 32k p.a job and a part time one 2.5k p.a. The second one is being taxed at 20%. Simple really.

System

You are only taxed at 40% once the total exceeds the 40% threshold £46,350. Only the amount going over gets taxed at that rate.


For example £46,350 will be taxed at 20% but if you earned one pound more (£46,351), that pound over will be taxed at 40%, not everything. So, effectively you'd pay 40 pence tax on that one pound...however, you are still earning 60 pence.


In my opinion, is always worth earning more as the tax is only on the amount you earn over the threshold. Considering that you are 12K under the threshold anyway, you can still earn 12K at 20% and the last portion will be taxed at 40%. If you want to clear debts, you should take this second job.

DrEskimo

andydownes123 wrote: »

You are only taxed at 40% once the total exceeds the 40% threshold £46,350. Only the amount going over gets taxed at that rate.


For example £46,350 will be taxed at 20% but if you earned one pound more (£46,351), that pound over will be taxed at 40%, not everything. So, effectively you'd pay 40 pence tax on that one pound...however, you are still earning 60 pence.


In my opinion, is always worth earning more as the tax is only on the amount you earn over the threshold. Considering that you are 12K under the threshold anyway, you can still earn 12K at 20% and the last portion will be taxed at 40%. If you want to clear debts, you should take this second job.

Oops....yes sorry my post had the old HRT threshold! I'll update it to reflect the new HRT threshold of £46,350 rather than £45,000.

Cheers :beer:

thisisbecky

Thank you everyone, makes sense!

DannyPearce90

This is good advice, but I would definitely approach a local accountant to get some official advice!