Taxes on extra employment

[energymc2]

Hello!

I have some pretty basic questions I hope you guys can help me with...

I work full time and my employer pays my PAYE as normal, however I have the opportunity to carry out quite a bit of extra work in evenings and weekends, for which the customers will pay me cash direct.

My question is how do I go about paying my taxes in order to remain legitimate? I have looked into it but am getting confused with NI, Class 2 contributions and what not!

Also I take it I can do all the necessary paperwork and calculations myself rather than employ the services of an accountant? Or is it adviseable to use an accountant for any reason?

Any help appreciated!

Thanks!

 

[Christiane]

Depends if you will be self employed for that second job or employed. If SE, you will have to fill a self assessment form at year ended March 2010 and taxed on that. If Employed, you will be taxed same as your job, at source. Your second employer shoud know if he/she runs a payroll.
Anyone correct me if I am wrong please....

 

[CassioAcc]

You need to register as self employed and then you will be required to complete a tax return. This will cover both your employed and self employed earnings. Your tax liability will be based on this.

As you are employed you can apply to defer any class 2 NI (which is paid by self employed). This is because you will be making class 1 contributions on your employment earnings.

You will need to keep records for your self employment and it is advisable to open a business bank account.

Whether you need an accountant is up to you. If you can do the basics then you should be ok, but an accountant may be able to save you money but this all depends on the details of your business.

 

[elaine@cheapaccounting]

Is this going to be a business or just extra income for now?

If business - register as self employed etc as suggested. Maybe go on the free HMRC course to get you started.

 

[energymc2]

Depends if you will be self employed for that second job or employed. If SE, you will have to fill a self assessment form at year ended March 2010 and taxed on that. If Employed, you will be taxed same as your job, at source. Your second employer shoud know if he/she runs a payroll.
Anyone correct me if I am wrong please....

Yes I will be self employed. The second job will be financially independant of my employer. I will be visiting customers houses, doing whatever I need to and the customer will pay me direct, and the entire amount will be mine.

As you are employed you can apply to defer any class 2 NI (which is paid by self employed). This is because you will be making class 1 contributions on your employment earnings.

So am I correct in saying: Class 1 and Class 2 are both NI contributions, Class 1 is the name given to contributions paid through employment and Class 2 is the name given to those paid through self employment?

But they are one and the same thing, therefore my employer simply needs to continue paying my Class 1 contributions as he has been doing?

You will need to keep records for your self employment and it is advisable to open a business bank account.

I take it if I simply issue the customer with a receipt (from one of those little numbered booklets) and keep the carbon copy will this be sufficient for tax purposes?

I don't think that I will need a bank account as the work will be occasional, small amounts, and paid to me in cash (not worth putting into an account!). Additionally there will be no expenses to claim so accounts-wise I see it being very simple.

Is this going to be a business or just extra income for now?

Just extra income for the moment, perhaps a full time business if things look promising. However I will have quite a few customers requiring a receipt for their own business purposes and for this reason I want to be cautious and do things by the book in order to avoind any possible penalties or investigations at a later date!

Many thanks for everyones help!

 

[David Griffiths]

So am I correct in saying: Class 1 and Class 2 are both NI contributions, Class 1 is the name given to contributions paid through employment and Class 2 is the name given to those paid through self employment?

But they are one and the same thing, therefore my employer simply needs to continue paying my Class 1 contributions as he has been doing?

They aren't exactly the same thing, but there is some interaction. Class 2 is a flat rate payable on self employment, and you might also be liable to Class 4, which is an earnings related form of NIC on self employment. You don't have to pay Class 4 until your earnings exceed £5715. You can ask not to pay Class 2 if your earnings are below £5,075. You can get out of all or part of Class 2 and Class 4 even if you earn more than that, as there is an overall cap on contributions, based on the maximum Class 1. Confused? You won't be alone.

I take it if I simply issue the customer with a receipt (from one of those little numbered booklets) and keep the carbon copy will this be sufficient for tax purposes?

I don't think that I will need a bank account as the work will be occasional, small amounts, and paid to me in cash (not worth putting into an account!). Additionally there will be no expenses to claim so accounts-wise I see it being very simple.

Yes a duplicate invoice will be fine. I'm sure that if you look hard enough there will be expenses that you can claim. What about travel to your customers for a start?

Just extra income for the moment, perhaps a full time business if things look promising. However I will have quite a few customers requiring a receipt for their own business purposes and for this reason I want to be cautious and do things by the book in order to avoind any possible penalties or investigations at a later date!

There's no difference in the tax treatment whether it's a full scale business or a bit of an earner on the side.

 

[energymc2]

Hi, been v. busy and only just had the chance to reply

Thanks for your help, indeed confusing re Class 2 & 4!

As for expenses, there are some, however they are minimal in comparison to the money earned and is pretty much restricted to the purchase of some cheap tools (which I already own), the aforementioned duplicate invoice book and commuting to and from customers.

However I would estimate this comes to no more than about £50 or £60 per £1000 earned, and the fact that I will be using the car for personal purposes the vast majority of my mileage, I'm not sure its worth the hassle of keeping records etc?

 

[David Griffiths]

You only have to keep mileage records of business trips, not of all the private trips.

Just record the distance that you travel and claim 40p for mile - it falls to 25p after 10,000 miles but I'll guess that you won't get close to that.

Don't forget other business trips such as going to the bank, going to buy supplies etc.

It's not complicated and the deduction is usually worthwhile.

 

[energymc2]

Hmmm 40p a mile... didn't realise it was that much. Seems I have a lot of reading up to do.

Thanks for your advice David. (And everyone else!) I'll be sure to post back with any other questions

 

[mike1337]

yes.. very much worth claiming especially if your like me up and down the motorway 200 miles a day

 

[David Griffiths]

yes.. very much worth claiming especially if your like me up and down the motorway 200 miles a day

For a part time business, after he's done his normal day's work?