MegaSack DRAW - This year's winner is user - rgwb
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Suppose your earnings from your normal job are just under the higher rate tax band. If you take a second job, or more accurately, did some seasonal ad hoc casual work for someone, taking your total annual earnings into the higher rate band, how do they sort out your tax or tax code? You'd need to pay 20% on some of it and 40% on some of it. I imagine that could get a bit griefy with HMRC?
Do a foreigner.
Self assessment.
I imagine that could get a bit griefy with HMRC?
Why? It wouldn't be the first time they've come across this situation. They know what they're doing.
0% to tax free allowance.
20% on the next bit up to the 40% band.
40% on anything above that bit.
Simples.
You only have one tax code even if you have multiple sources of income. The seasonal job will be taxed at your higher rate from the first £1 based on what you've said. As above this may be sorted out on your tax return. Remember you have NI to pay too. HMRC is very much used to people having multiple sources of income, the standard personal tax return can handle it.
On PAYE or doing it yourself?
If the former then both employers will get a tax code from HMRC that tells them how much to tax you.
Doing it yourself you just fill in the income box on the self assessment form and they'll either give you a bill or let you opt to pay it via PAYE next year.
Pop into your local fire station they will know. 😀
They're all retained up here drac, so I don't like to think how that works!
I think I'd have the choice of PAYE or getting paid gross and having to do my own return. Any advantage of one over the other? Obviously my main job is PAYE. Second job wouldn't earn enough to incur NI deductions - it's basically something I'd probably be doing anyway for the craic, but the opportunity has arisen to get paid for it!
Where I imagine it could be tricky through PAYE is that at some point during the season the income from the second job, on top of my annual salary for my normal job, would take me into the 40% band. How would that work on PAYE?
....it's basically something I'd probably be doing anyway for the craic, but the opportunity has arisen to get paid for it!
Am I close?
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Regrettably, I don't think people would pay much for that. In fact, I dare say I would incur substantial fines for public order offences - perhaps even taking me down a tax bracket?
Where I imagine it could be tricky through PAYE is that at some point during the season the income from the second job, on top of my annual salary for my normal job, would take me into the 40% band. How would that work on PAYE?
How wouldn't it work? You don't pay 40% on everything, just the chunk over the threshold, so when you cross that threshold you start paying 40%. Simple.
I had this. Even I could sort it all out through self-assessment. All you need is the P60 from each employer. If you have underpaid tax (say because second job has taxed you at standard rate rather than higher rate) then you can either get your next year's tax code adjusted (for small amounts only I think) or they'll want a payment. So squirrel away some cash if you think this might happen.
One odd thing I discovered from this is that there is a ceiling for NI in any given year so if, across the two jobs, you go over that ceiling, you get a letter from Newcastle, fill in a form, and a few weeks later a cheque arrives.
They know what they're doing
HMRC? As in, Her Majesty's Revenue and Customs? HMRC know what they're doing?
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It's quite simple, really - you get a tax code for each employment. The coding notices you get specify to which employment they apply, so it should be possible to keep track. Once you've exhausted your 20% band, you get into codes like D0 (40%) on everything, K codes, where the number is an addition rather than an offset (although that's normally if you have an income that can't be taxed at source, like state pension).
Bear in mind that a huge number of pensioners will have more than one source of income, never mind people with two jobs, so HMRC have coped before. We run a pension scheme, and we have some people getting two pensions just from us, so see this often enough.
HMRC know what they're doing?
They do if you're not in the shallow end of the income pool! (You don't want to mix with them, really you don't). The call-centre people have too little time and no flexibility.
Regrettably, I don't think people would pay much for that. In fact, I dare say I would incur substantial fines for public order offences - perhaps even taking me down a tax bracket?
I'm pretty sure you can't claim a fine as an allowable expense and offset it against your income.
Where I imagine it could be tricky through PAYE is that at some point during the season the income from the second job, on top of my annual salary for my normal job, would take me into the 40% band. How would that work on PAYE?
If done via PAYE it averages out.
Roughly it works as:
Earnings to date this tax year + (this months pay x remaining months in tax year) = what HMRC assumes you will earn by next Apirl. It then works out how much they need to tax you so that if your pay was the same each month going forward, you'd have the same take home and tax each month.
So if your income drops back below a threshold, the tax you need to pay by April drops too, and you get a bit of money back each month (or rather, you pay less tax).
E.g. I got a (net, after tax) £600 bonus around September, What I actually got in my pay cheque was £500 (because HMRC tax it as if I'm getting £600 extra every month going forward), and £100/7 a month each month until April.
So essentially I would need a new tax code for the second job, then everything would work itself out over time?
I'm pretty sure you can't claim a fine as an allowable expense and offset it against your income.
Hmm...even if it's a business expense? 🙂