help please 2nd income tax info required
Discussion
All, need a bit of help in behalf of my wife.
At present, she is working reduced hours (due to baby) but fully employed for her current employer however she has been asked if she would be able to do some consultantency work for a third party.
What we don't understand is how this would work with regard to tax (and NI) implications with regard to the additional income that she would be receiving. A couple of colleagues mentioned that all she would have to do is declare the additional income on her tax return but we are not sure if it is as simple as that.
Any help would be greatly apprecaited
At present, she is working reduced hours (due to baby) but fully employed for her current employer however she has been asked if she would be able to do some consultantency work for a third party.
What we don't understand is how this would work with regard to tax (and NI) implications with regard to the additional income that she would be receiving. A couple of colleagues mentioned that all she would have to do is declare the additional income on her tax return but we are not sure if it is as simple as that.
Any help would be greatly apprecaited
It depends in what capacity she is being used.
If this second activity is just another employment, then she doesn't have to do much at all. Her new employer will simply put her on the payroll and deduct tax at basic rate (20%) from whatever salary he is paying her.
If the new position is deemed to be a self-employment, then the onus is on her to contact the Revenue within three months of the commencement of the self-employment. The first thing a self-employed individual has to do is ensure that they are paying the Self Employed NI contribution (Class2) which is paid monthly by direct debit or quarterly by cheque (that is why the three month rule applies for notification). If her self employed income is going to be below £4,825 for 2008/09, she can apply to not have to pay the Class 2 NI - but the three month notification requirement still stands.
The Revenue are not overly keen on a second "employments" being classified as a "self-employment", unless the individual can demonstrate that the activity is not an ordinary "employment" and is a bona-fide sole trade. Being a part time job is not enough ton its own to prove that it is not an employment situation.
If this second activity is just another employment, then she doesn't have to do much at all. Her new employer will simply put her on the payroll and deduct tax at basic rate (20%) from whatever salary he is paying her.
If the new position is deemed to be a self-employment, then the onus is on her to contact the Revenue within three months of the commencement of the self-employment. The first thing a self-employed individual has to do is ensure that they are paying the Self Employed NI contribution (Class2) which is paid monthly by direct debit or quarterly by cheque (that is why the three month rule applies for notification). If her self employed income is going to be below £4,825 for 2008/09, she can apply to not have to pay the Class 2 NI - but the three month notification requirement still stands.
The Revenue are not overly keen on a second "employments" being classified as a "self-employment", unless the individual can demonstrate that the activity is not an ordinary "employment" and is a bona-fide sole trade. Being a part time job is not enough ton its own to prove that it is not an employment situation.
Thanks for your responses so far
I believe that the second job will be on a self employed basis, its not a huge amount probably 7-10 hrs per week. so next steps remembering that she is still employed for her principle job:
(1) it looks like she will need to register as self employed - assuming that hmrc provide a leaflet for this.
(2) as her annual allowance will be taked into account in the princple job, I am assuming (for the self employed part) that on top of class 2, there may also be class 4 contributions - is this based on the amount that is earned from the self employed role or does it take into account all earned income?
(3) it is a distinct possibility that she will be starting this week, can the self employed registration be backdated to this week if we set this up in January?
(4)..or... can the additional income just be added on a self assessment form?
Apologies for the questions which may seem blindingly obvious to some!
I believe that the second job will be on a self employed basis, its not a huge amount probably 7-10 hrs per week. so next steps remembering that she is still employed for her principle job:
(1) it looks like she will need to register as self employed - assuming that hmrc provide a leaflet for this.
(2) as her annual allowance will be taked into account in the princple job, I am assuming (for the self employed part) that on top of class 2, there may also be class 4 contributions - is this based on the amount that is earned from the self employed role or does it take into account all earned income?
(3) it is a distinct possibility that she will be starting this week, can the self employed registration be backdated to this week if we set this up in January?
(4)..or... can the additional income just be added on a self assessment form?
Apologies for the questions which may seem blindingly obvious to some!
scooters said:
Thanks for your responses so far
I believe that the second job will be on a self employed basis, its not a huge amount probably 7-10 hrs per week. so next steps remembering that she is still employed for her principle job:
(1) it looks like she will need to register as self employed - assuming that hmrc provide a leaflet for this.
(2) as her annual allowance will be taked into account in the princple job, I am assuming (for the self employed part) that on top of class 2, there may also be class 4 contributions - is this based on the amount that is earned from the self employed role or does it take into account all earned income?
(3) it is a distinct possibility that she will be starting this week, can the self employed registration be backdated to this week if we set this up in January?
(4)..or... can the additional income just be added on a self assessment form?
Apologies for the questions which may seem blindingly obvious to some!
On what baisis is she "self employed">? The Revenue will always state that one has no "choice" in this matter.I believe that the second job will be on a self employed basis, its not a huge amount probably 7-10 hrs per week. so next steps remembering that she is still employed for her principle job:
(1) it looks like she will need to register as self employed - assuming that hmrc provide a leaflet for this.
(2) as her annual allowance will be taked into account in the princple job, I am assuming (for the self employed part) that on top of class 2, there may also be class 4 contributions - is this based on the amount that is earned from the self employed role or does it take into account all earned income?
(3) it is a distinct possibility that she will be starting this week, can the self employed registration be backdated to this week if we set this up in January?
(4)..or... can the additional income just be added on a self assessment form?
Apologies for the questions which may seem blindingly obvious to some!
Is she now running her own business i.e. trading.
If she cannot show that what she plans to do for this business is a new "trade" then she may not really be self-employed.
i) will she use her own tools?
ii) will she determine how and when she works?
iii) will she be taking out employer, third party or indemnity insurance?
iv) will she have her own office 0r place of work?
v) will she be able to send someone of her own choice in her place if she cannot make it to an assignement?
vi) will she be paid for sickness and holidays?
vii)does the business she is going to work for have any other people working for them in a similar capacity?
Whether she works full or part time in this job has no bearing whatsoever on her employment or self-employment status. There are plenty of part time employees in the workplace.
If she can legitimately show that she is genuinely self-employed, then she is still within the three month woindow to notify the Revenue.
Class 4 NI is charged as part of the Self Assessment Income Tax calculation and is payable as part of the overall Self Assessment tax bill. It is only charged on taxable trading profits exceeding £5,435 (tax year 2008/09).
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