Ad-hoc second income - understanding trading allowance

patchyX2

I work a full-time job and get paid via PAYE. To top up my income, I am planning to do some ad-hoc work on the side. I'm a software tester by trade, so I've signed up to a couple of websites that will send the odd job your way to carry out testing for various companies. They pay via PayPal.

Am I right in saying that this would be covered by the tax-free trading allowance, and as long as I earn less than £1000 from this, I won't need to pay any tax on it (obviously I'll still be paying tax through PAYE for my main income)?

I have recently moved into the 40% tax rate band, and as a result I am planning to complete a self assessment tax return as I'm only getting a 20% contribution on my pension. I'm assuming that I will need to add details of this income onto the self assessment, but because it's below £1000 then nothing will happen. Is there any particular kind of evidence I need to capture which will make my life easier come self assessment time?

Lastly, am I right in saying that if I earn over £1000, then I have to pay 40% tax on the whole lot, not just the portion over £1000? 

Jeremy535897

If you start up a self employed business, once turnover in the tax year exceeds £1,000, you need to register as self employed. If turnover is £1,000 or less, you don't need to report it on your tax return, unless you have a loss you want to claim.

If your turnover is say £1,500, you can choose to deduct the actual allowable expenses you incur, or the £1,000 trading allowance, to arrive at the taxable profit on which you pay 40% tax. Once your business takes off, you may also become liable for class 2 and 4 NIC.

Dazed_and_C0nfused

I have recently moved into the 40% tax rate band, and as a result I am planning to complete a self assessment tax return as I'm only getting a 20% contribution on my pension. I'm assuming that I will need to add details of this income onto the self assessment, but because it's below £1000 then nothing will happen. Is there any particular kind of evidence I need to capture which will make my life easier come self assessment time?

If you don't need to register for Self Assessment because of your self employment/ad hoc income then there would nornally be no need to register just to claim any higher rate tax relief due on pension contributions.

What method are you using to get this money into your pension?

Relief at source

Net pay

Salary sacrifice

patchyX2

Jeremy535897 said:

If you start up a self employed business, once turnover in the tax year exceeds £1,000, you need to register as self employed. If turnover is £1,000 or less, you don't need to report it on your tax return, unless you have a loss you want to claim.

I'm not planning on exceeding the £1000. It's just a a bit of extra pocket money really, certainly not something I'm looking to turn into a business. 

Dazed_and_C0nfused said:

What method are you using to get this money into your pension?

Relief at source

Net pay

Salary sacrifice

I believe it's a relief at source scheme based on the feedback in this thread:
https://forums.moneysavingexpert.com/discussion/6383828/help-understanding-my-pension-deductions

Dazed_and_C0nfused

PledgeX2 said:

Jeremy535897 said:

If you start up a self employed business, once turnover in the tax year exceeds £1,000, you need to register as self employed. If turnover is £1,000 or less, you don't need to report it on your tax return, unless you have a loss you want to claim.

I'm not planning on exceeding the £1000. It's just a a bit of extra pocket money really, certainly not something I'm looking to turn into a business. 

Dazed_and_C0nfused said:

What method are you using to get this money into your pension?

Relief at source

Net pay

Salary sacrifice

I believe it's a relief at source scheme based on the feedback in this thread:
https://forums.moneysavingexpert.com/discussion/6383828/help-understanding-my-pension-deductions

There doesn't appear to be any need to register for Self Assessment then.