NI and weekly earnings - second job

jozbo

Hi 
as in the title - I currently have the following arrangement -
1st job £25k pa gross
2nd job approx £1000 per week gross 

The second job is via an agency and umbrella company. I’m paying NI and tax on both (as expected). 

My query is that whether it is advantageous for NI to claim for 2 weeks at a time on the 2nd job when I come to send my timesheet to the umbrella company. I understand that over around £960 per week additional NI contributions fall to 2% rather than 12%. The work that I do is project based so it is fair to claim two projects (at £1000 each gross) in one week, just that I usually claim one at a time. Of that gross figure I am taking away about £540 so looking for ways of cutting these contributions where I can.

thanks 

Jeremy535897

You should look at https://www.gov.uk/defer-national-insurance

Just altering your pay on the second job to fortnightly won't work, so you would have to be paid uneven amounts each week. I don't know if this would be practical with an umbrella company.

Dazed_and_C0nfused

I don't think the op meant change to fortnightly pay.

More that they would "forget" to send a timesheet or whatever is needed for the second employer to process the pay and then send two together, which would be paid as a weekly payment by the employer.

And repeat.

jozbo

Jeremy535897 said:

You should look at https://www.gov.uk/defer-national-insurance

Just altering your pay on the second job to fortnightly won't work, so you would have to be paid uneven amounts each week. I don't know if this would be practical with an umbrella company.

Thanks, I did wonder about whether it was worth deferring NI. Does that then need to be paid at the end of the tax year? I don’t complete a self assessment any more.

jozbo

Dazed_and_C0nfused said:

I don't think the op meant change to fortnightly pay.

More that they would "forget" to send a timesheet or whatever is needed for the second employer to process the pay and then send two together, which would be paid as a weekly payment by the employer.

And repeat.

Yes that’s right. As I said it is project based so no issue really with having weeks with no hours claimed and others with two projects. 

Any advice about how I would work out the financial benefit of doing this? My gross pay (after Employers NI, umbrella fees and apprenticeship levy) is £877.

 It would incur a bit of extra effort on my part in terms of timing projects around the end client etc. as everything would need to line up, but if we are talking over £20-30 saved in NI it’s probably worth it for me.

chrisbur

Your first problem is with the umbrella company.  Will they co-operate with this knowing you are doing it to avoid paying some national insurance. You will be on a weekly payroll and the rule is that if you miss a week and are then paid two weeks together then NI should be calculated on each of those weeks separately so that you pay the same NI as you would have done if paid each week separately.  Will they be prepared to ignore the correct procedure and risk HMRC spotting this?

jozbo

chrisbur said:

Your first problem is with the umbrella company.  Will they co-operate with this knowing you are doing it to avoid paying some national insurance. You will be on a weekly payroll and the rule is that if you miss a week and are then paid two weeks together then NI should be calculated on each of those weeks separately so that you pay the same NI as you would have done if paid each week separately.  Will they be prepared to ignore the correct procedure and risk HMRC spotting this?

Right ok, I didn’t realise that. So as I am officially on weekly payroll and paid a day rate (for projects of a set duration), I am effectively committed to the current NI rate?

as far as I can tell, I am not quite earning enough yet to be able to defer NI. This is a relatively new second job and I’m not sure yet how long I will continue this work. It makes it hard to inform HMRC definitively of the total over the whole tax year (22/23) being above the deferring limit, although will probably exceed £28-30k.

Grumpy_chap

jozbo said:

2nd job approx £1000 per week gross 

The second job is via an agency and umbrella company. I’m paying NI and tax on both (as expected). 

My query is that whether it is advantageous for NI to claim for 2 weeks at a time on the 2nd job when I come to send my timesheet to the umbrella company. I understand that over around £960 per week additional NI contributions fall to 2% rather than 12%. 

That query is almost certainly academic.

Whether you send timesheets weekly or batch them up, the UC will almost certainly treat then as earnings spread across the period to which the timesheets relate.  Send one timesheet covering one week and it will be treated as one week.  Send 6 timesheets covering 6 weeks and they will be treated as 6 weeks.

The most obvious opportunity to reduce tax liability via the UC will be pension contributions.

Is the 1st job PAYE or contract via your own Ltd Co.?  If the latter, that may offer more flexibility in the way drawings are processed.

jozbo

Grumpy_chap said:

jozbo said:

2nd job approx £1000 per week gross 

The second job is via an agency and umbrella company. I’m paying NI and tax on both (as expected). 

My query is that whether it is advantageous for NI to claim for 2 weeks at a time on the 2nd job when I come to send my timesheet to the umbrella company. I understand that over around £960 per week additional NI contributions fall to 2% rather than 12%. 

That query is almost certainly academic.

Whether you send timesheets weekly or batch them up, the UC will almost certainly treat then as earnings spread across the period to which the timesheets relate.  Send one timesheet covering one week and it will be treated as one week.  Send 6 timesheets covering 6 weeks and they will be treated as 6 weeks.

The most obvious opportunity to reduce tax liability via the UC will be pension contributions.

Is the 1st job PAYE or contract via your own Ltd Co.?  If the latter, that may offer more flexibility in the way drawings are processed.

Thanks, 
the first job is PAYE. 

I considered pension contributions but dismissed it as I would prefer to invest more flexibly in a S&S ISA as I’m some way from retirement and need cash flow at the moment . On the other hand I’m walking away with just over half the assignment project rate.

What thresholds would I need to think about if I went down the pension route ? I also have a lot of student loans that are also being deducted now, am I right in thinking I would save on tax, NI and student loan payments? . 

I will give that some more thought.

I have explored setting up a Ltd Co for the contracting but it would exclude some contracts so probably better sticking with the UC for now.

in terms of timesheets I expect that I would submit a claim eg for week ending 6/3/22 I would claim for 2 projects that week, and submit both to the end client then rather than one per week. But it would be quite a bit of hassle if not much benefit.

Grumpy_chap

I assumed that, as you are using an UC, the 2nd job must be inside-IR35.

If the second-job is outside-IR35 and the Agency / Client will accept it, having your own Ltd Co. is likely to be advantageous, assuming the expected duration of the second job has some longevity (or will be replaced with another second job if this one ends).  This would be worth a quick conversation with an Accountant.

EDIT:

jozbo said:

On the other hand I’m walking away with just over half the assignment project rate.

Ah, yes, you said above £1k gross and £540 nett.
The deductions will include:

• UC fee, around £25
• Employer's NI, around £130
• Apprentice Levy, around £5
• Employee NI, around £95
• Income Tax, around £170

That leaves around £575 less whatever the student loan payment is (sorry - I have no idea).  My figures are very approximate, there are others that could give precise numbers if it was important.

Against that, assume you did SS for all but NMW.  From April, 40 hours x £9.50 = £380.  You would have the same £1k gross and then:

• UC fee, around £25
• Pension contributions £550
• Employer's NI, around £40
• Apprentice Levy, around £2
• Employee NI, around £30
• Income Tax, around £76

That means take home around £275 less student loan payment but you also have £550 in your pension, so your total "value" has increased from £540 to £825 - albeit with a large proportion deferred which is not attractive to you right now.  Again, I've used very approximate figures and it will need someone with knowledge of all current rates to give a more accurate numbers.  Basic online calculators are not easy to use because all of the salary from second job is taxed as first job used up your personal allowance.

Two more things to consider here:

1. I did the calculations on 20% income tax rate but, if the first job is paying £25k and second job paying £1k per week (£50k) at least some of your income will ordinarily end up taxed at 40%.  Are the UC applying that?  I suspect not, so you may need to consider saving some funds to make that tax payment at the end of the tax year.
2. The UC fee (margin) will be a "per week".  If you tried to do the adjustment you suggest with regard to time-sheet submittals, the UC will still need to treat as individual weeks otherwise they are losing out on their income (which is pretty low anyway).

Again, it looks like a quick chat with an Accountant might be worthwhile, though the UC may run a projection with pension contributions for you and provide that answer at no additional charge.

jozbo

Thanks, that’s incredibly helpful. I have spoken to a few accountants as had scope for some contracts outside ir35, however the vast majority now reside inside ir35 and therefore after running some numbers I decided the accountancy costs and admin effort wasn’t really worth it. 

I think salary sacrifice pension looks like a good route to go down, also as you mention I am likely to tip into the 40% tax bracket at some point in the year. If I try and keep my UC income just under £21,000 pa after salary sacrifice it looks like there will be less coming out towards the student loan too. 

The salary calculator website has a two jobs option which is very useful to play around with and I can put all the options in there. 

Seems like if I SS’d £300 per week on the UC (2nd) job I would take home around £1230 net per month as opposed to £1640, but have put £900 into the SIPP. Therefore around £2130 as current and deferred benefits, and much less of my hard earned cash paid out as tax.

lots to think about…