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Tax treatment of part-time income

I am working full-time for a company and am considering some part-time assignment during week-end on a one-time basis. I am in the 40% bracket. How will the income obtained from the proposed assignment be treated in my hands? I do not want to be classified as Self-employed for this purpose and I propose invoicing it in my name? How much NIC do I have to pay? Any other issues that I need to be aware of?
Rajaram Jamadagni


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05th Aug 2002 15:29

BR Tax and NI - Deferment is an option
In my job, we make payments to people who are paid as second employment. The initial tax code is BR as per the previous postings and the Revenue may eventually get round to correcting the code to D0. The national insurance will initially be treated as Table A with employee contributions deducted. If you intend to do this work for one or two clients, then you may want to consider applying for a deferment of National Insurance on any payments made by those clients. As your earnings from your primary employment is above the maximum for Class 1 employee contributions, it may be worth considering making this application so that no employee contributions are deducted at source and you then have to fight for refunds. This is however an annual application and the Deferment Group in Longbenton have not been the most efficient in my experience.

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01st Aug 2002 15:14

I agree all the Mr Eglintine says except for the bit about the tax code. The tax office dealing with the second employment, if indeed that is what it is, will probably issue a tax code of D0 which will mean that income tax is deducted at a flat rate of 40%.

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By neileg
01st Aug 2002 16:47

Agreed 2, the sequel
I agree with Mr Rees, except that the employer should follow the emergency tax code provisions resulting in a tax code of BR for the first occasion when a payment is made. If the payment continues, a revised code of D0 should be issued by the Revenue and applied by the employer.

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By neileg
01st Aug 2002 13:04

I'm sorry but it's not clear what the setup is here. The question of whether you are employed or self employed for any work is not an option on your part, but a question of fact. There are, however, considerable grey areas around the status question in almost all cases.

Your statement that you don't want to be self employed and intend to invoice in your own name is contradictory. If you are raising an invoice, whether you use your own name or call yourself Acme Consulting, you are, prima facie, self employed.

As Claire implies, if you are not self employed you must be employed. The company for whom you work would pay you through PAYE, probably applying a BR tax code, and applying Class 1 NIC at rates appropriate to the pay frequency (usually monthly or weekly). Then when you submit your SA tax return, you will have a P60 from this additional work to enter as a second employment. You will have to calculate the extra tax you owe, ie 40% minus the tax deducted at basic rate. The system is the same whether you are paid just once, or repeatedly.

If you are self employed, you should inform the inland revenue promptly to avoid a penalty. You will have to fill in a self employment page in your tax return. I think (you need to check) that you can defer paying any Class2 NIC (weekly self employed).

Unless you will be incurring a lot of personal expense that can be attriuted to the work, you tax liability is likely to be the same regardless of whether you are treated as employed or self employed. It's easier for you if you are employed, and the employer will only have a small amount of hassle paying you via PAYE. They may incur an NIC liability.

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By Anonymous
01st Aug 2002 11:53

If the company providing you with the part time assignment work is happy for you to be an employee them HMIT will have to be notified by someone so that you are taxed at the correct rate - a second PAYE coding notice will be issued to ensure this is done.

NIC will be paid by yourself from next April at 1%, as you are already over the upper earnings level (you are a higher rate taxpayer). The employer will have to pay employers NIC also.

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