Goochie

If you work in a full time job, paying tax and NI accordingly then start a second job "on the side" should you pay tax on this second source of income at the same rate as your main job?

If people pay you via personal cheque for the second income, is it likely that the tax man would ever find out (given the cheques are irregular and of varying ammounts)?

VRStu

If you are employed on PAYE for the second income then you should pay BR tax.

However should said person be given money via a personal cheque then he may not be employed PAYE. It depends on how the payee is 'losing' the money.

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robmawer

AFAIK, yes, but it depends on what this "second source" actually is...whether you're an employee, or self-employed, etc.

It's unlikely they would ever find out, it depends what other associated documentation you have for this income - if all agreements are verbal then these cheques could be "gifts". If you're giving invoices which are being paid to you, then you're essentially working as a sole trader and so would need to notify HMRC of this, and also complete annual tax returns (and pay the associated tax and NI).
Depends whether you want to risk it or not...


Rob.

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tinkerbell

Simple answer, yes, though contrary to popular belief, you actually come out slightly with more ‘net’ money than you would if you were to earn the same amount of ‘gross’ money in your main employment due to the fact you can currently earn £97.00 per week before you fall into the National Insurance threshold (assuming employment and not self employment).

If the taxman were to look at your bank account (which they are entitled to do) how would you explain where these irregular banking’s came from?

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Goochie

So if your first source of income was, for example £29k and the second source was £5k - you'd still pay just BR tax on the second income?

In addition, if going for *official* delcared income from the second then doing self-cert tax each year, is it worth the employer for the first income taking NI contributions and not tax (or not taking either) if possible?

robmawer

I don't think that's an option on PAYE anyway - they'd have to take you on as a contractor or similar.


Rob.

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Chris GB

Hi

When I was PAYE and building the IT business, I used to just leave my employer to do their bit and submit a self assessment for the other bit. If your business is small scale and you dont issue invoices, particularly to companies or self employed people who will claim your fees against their allowance, you chances of being investigated or found out are very slim, unless someone shops you.

I would not mind paying tax if it were spent in useful ways, but given the nature of the way we are governed, I feel violated every time I pay my tax. Being self employed, I have to have bombproof accounting and accoutability in case I do get audited, so no room for dodging tax for me

Chris

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DaveU

Only if the taxman reads Briskoda

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steviec

Or Someone shops you, or you have to do or get asked to do Self Assessment. Then you'd have to declare it.

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Emily-Elizabeth

I did something slightly similar when I was self employed. I have a inhertied my Dad's allergy to paying tax - we come out in hives and vomit pyrotecnically.

I use to milk on one farm - 100% above board all declared and I was just under the tax bracket so go away with only being charged NIC (which one day I will get round to actually paying)

I then did work on another farm getting paid by a personal cheque (but from a buisness bank account). I tried to open a Channel Island bank account when visiting my dad in Guerney (see previous statement about tax aviodance) but they told me to bugger off. I also worked as an Ann Summer's party organiser (which was a disaterous as I was too nieve to sell sex toys to middle age women). The little money I did earn was also cash and went straight back into my wallet.

I never got found out, but I doubt the quanitiy of money I was earning from milking a few cows and selling underwear was in the same league as other people do.

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Goochie

Heres hoping the cows dont grass you up, Emily

TeflonTom

the best way to avoid paying tax at all is to, start up you own limilted company with you as the managing director and say your swmbo as the company secretary, then whoever you work for takes your company on as a contractor and all money is payed to the company and not to you directly. now your company say"Goochie Holding Ltd" only pays you the managing directot a salary of £4800 per annum, which means you pay not income tax or national insurance.. ok where's the rest of my money i hear you say!

as a shareholder of "Golchie Holdings Ltd" you are entitled to a share dividend every year which is only taxable at 10% becuase you are only on a salary of £4800, but becuase you are on a the lowest tax code you are entitled to a 10% tax credit which cancells out the 10% deducted, therefore you pay no tax, this applies upto £33,000 per year. but if you go over you could always pay the divedend to your swmbo (who as company secretary is also a shareholder)..

Goochie

Is this the voice of experience or just hear-say, Tom ?

Wouldnt I pay NI and tax on the £4800 as my income from both jobs would then be over £4800 ?

TeflonTom

no comment! the loophole will eventually get closed by the revenue

yes, if your income was over 4800. but not if your company was a contractor for both of the firms you work for and all the money was payed to your company and not directly to you.



i know of at least 3 other people in portsmouth and 1 on the IOW doing this too. it's even been known for a 'Managing Directors' meeting to take place to compare notes!!

Goochie

steviec

One thing I learnt with the Tax Man is don't upset them. If you do like I did many years back they go through everything from years back (7 IIRC) with a fine tooth comb and ask for proof of everything from you.

That is unless you are doing a Lester Piggot and don't mind 18 months at Her Majesty's Pleasure for a few million.

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Emily-Elizabeth

Never underestimate the British Vigin Islands for true tax avoidance.

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TeflonTom

or avoiding the beak!

JPreston

Without even going into IR35 and the fact that HMRC can simply disregard that whole arrangement and slap a big tax liability on you, that's not correct because dividends are paid out of profit after tax and so you would need to pax corporation tax in your company first. So add 19% (or whatever it is; small company's rate) to the 10% tax on dividends and you start paying tax at 29%....

eddie

You're not an accountant, are you? If you are, I'm glad you'renot mine!

The limited company pays, as you say, corporation tax on your gross profit. The dividend is paid out of the net profit. It pays you the declared dividend less the tax, and you acquire a tax credit. However, the deduction remains in the company's bank account - it isn't paid to HMRC, so you're not paying 29% tax. If you are, I'd suggest you find a good accountant. Actually, I'd recommend that anyway, mine saves me far more than he costs me.

TeflonTom

what he said

JPreston

There's exactly two accountants in this thread and I bet that's more than turn up to the Southampton Director's Club or whatever it is.

Though I neither work for or advise small companies I feel pretty confident saying that even small companies do in fact pay tax over to HMRC eventually. Here you have a small service company with an employee who is both a director and a 100% owner. The individual either derives his income from salary or dividends. On what he takes as salary, he pays PAYE and NI - same as everyone - and the company also pays employer's NI. Any dividend payments are paid out of taxed profits which are then taxed again on the individual as dividend income, though no NI this time. There is a tax advantage in taking dividends because of no NI and most likely total tax in both company and individual will be less than the 40% income tax liability on earned income but the problem is; you are no longer allowed to simply set up a service company and claim your earned income is a dividend.

If you would like to learn more, your accountant will be happy to explain the practicalities of having to demonstrate to HMRC that the salary you take is sufficient to support your lifestyle and that you are not relying on dividend income for the same. Or alternatively any number of free online tax calculators will show you that a higher rate tax payer who is caught by IR35 and does not choose an appropriate trading vehicle can very easily end up with a higher total tax liability than if he was directly employed by his client. You cannot in reality pay yourself £4,800 and expect the balance to be treated as dividend, this will be disregarded by HMRC in the event of an investigation.

TeflonTom

i think basically it's not worth trying to fiddle the tax man because they'll catch up with you eventually, besides if you do it you end up never paying NI contributions which means when you get to retirement age you wont be able to get a pension(if it even still exists when i'm that old!!!)