Paying Tax when I am both Employed and Self-employed

girlagogo

I have one main job  as an employee which pays just under my tax allowance threshold and will do until the end of the 2024 tax year .  However, I am also doing adhoc work as a second means of income which is classed as self employment and so far has totalled £640 in the current tax year.  I am not sure how I would be taxed on this second income.  Would this additional amount be combined with the income from my main job by HMRC and tip me over into both incomes being taxed as one amount or would  the self employed amount of £640 be taxed on its own, separately?

 I have read that up to £1000 does not need to be declared on a self assessment tax return but I am still not clear if this is the case when I also am employed.

Dazed_and_C0nfused

girlagogo said:

I have one main job  as an employee which pays just under my tax allowance threshold and will do until the end of the 2024 tax year .  However, I am also doing adhoc work as a second means of income which is classed as self employment and so far has totalled £640 in the current tax year.  I am not sure how I would be taxed on this second income.  Would this additional amount be combined with the income from my main job by HMRC and tip me over into both incomes being taxed as one amount or would  the self employed amount of £640 be taxed on its own, separately?

 I have read that up to £1000 does not need to be declared on a self assessment tax return but I am still not clear if this is the case when I also am employed.

If you are able to claim the trading allowance then you only need to do something once your turnover reaches £1,000 (in a tax year).

Then you should register as self employed with HMRC.  And also register for Self Assessment.

Your Self Assessment return covers all sources of taxable income (and any tax deducted at source) and you get a bill, or refund, based on your overall tax position.

FlorayG

Best you do a self-employed tax return in April anyway just in case - there's nothing worse than getting a huge bill years later and a small amount won't be taxed much.

Bookworm105

girlagogo said:

 I have read that up to £1000 does not need to be declared on a self assessment tax return but I am still not clear if this is the case when I also am employed.

Your tax position is the total of all sources of income. The question is does that total exceed your personal allowance? If it does then you may need to compete a tax return if you have any source of income from which has not already been paid 
check it yourself: https://www.gov.uk/check-if-you-need-tax-return 

the trading allowance of £1,000 relates to self employment and you are correct in the sense that you deduct that from your gross SE income (turnover) and if that creates a +ve number than you have taxable SE "profit"

if the 1k covers all your income (in the case of 640 obviously it does) then you left with £0 taxable SE profit

note carefully, if you claim that 1k you cannot deduct any other costs incurred in your SE work from your SE income. Obviously therefore you are able to chose whether to claim the 1k or not. If your cost are >1k then you can claim them but will need to keep accurate records of your income and expenditure aka a "trading account" showing how you arrived at your profit.

EXAMPLES:
A) job income is less than your personal allowance:
Job 12,000
less personal allowance -12,570
tax on job 0
remaining PA 570
SE income 640, less allowance 1,000  = 0
(note you cannot create a loss when claiming the allowance)
net tax position: tax on job + tax on SE profit 0

B ) job income is less than your personal allowance BUT with higher SE income
Job 12,000 - 12,570(PA) = -570 remaining PA (tax on job = 0)
SE 1,640 - 1,000 (allowance) = 640 taxable profit less remaining PA 570 = 70 total taxable income @ 20% = £14 tax payable via a tax return 

girlagogo

EXAMPLES:
A) job income is less than your personal allowance:
Job 12,000
less personal allowance -12,570
tax on job 0
remaining PA 570
SE income 640, less allowance 1,000  = 0
(note you cannot create a loss when claiming the allowance)
net tax position: tax on job + tax on SE profit 0

B ) job income is less than your personal allowance BUT with higher SE income
Job 12,000 - 12,570(PA) = -570 remaining PA (tax on job = 0)
SE 1,640 = 1,000 (allowance) = 640 taxable profit less remaining PA 570 = 70 total taxable income @ 20% = £14 tax payable via a tax return 

Those examples are really helpful, thank you.

MetaPhysical

....not forgetting that SE income is also subject to NI class 2 and 4 as well if your taxable profits are above a certain threshold.  The tax return will work it out for you.  Class 2 have recently been abolished.

I also believe that when you submit your first tax return, HMRC will also request part payment towards the next tax year as well.  If you retire the business or if you make less profit the following year then this will be refunded totally or on a pro-rata basis.  The Self assessment "trues backwards".

Others are more learned than me on this.

Dazed_and_C0nfused

MetaPhysical said:

....not forgetting that SE income is also subject to NI class 2 and 4 as well if your taxable profits are above a certain threshold.  The tax return will work it out for you.  Class 2 have recently been abolished.

I also believe that when you submit your first tax return, HMRC will also request part payment towards the next tax year as well.  If you retire the business or if you make less profit the following year then this will be refunded totally or on a pro-rata basis.  The Self assessment "trues backwards".

Others are more learned than me on this.

That is wishful thinking 😄.

Class 2 NI still exists but the instances where it needs to be paid are much reduced.

POA may well be due but there are three rules which can mean they often aren't required.

LITRG

Hello. We are the Low Incomes Tax Reform Group (LITRG), part of the Chartered Institute of Taxation who are an educational charity. We are not part of HMRC or MSE. Although we can’t give individual advice, you might find our website information useful as it touches on all the issues raised in this thread: https://www.litrg.org.uk/working/gig-economy. If you require further help, we recommend that you contact a tax adviser, HMRC or one of the tax charities where relevant. You can find more information about where to get help with tax here: https://www.litrg.org.uk/tax-nic/getting-help-tax. Thanks.