working at more than one job

[annieigma]

Hi,
My Daughter is on paid job experience, 4 hours a day, 4 days a week. She is a colledge graduate, and also wants to do other part time or self employed work.
As she is p.a.y.e. in the current job, how does She go about paying tax on any other work? is it legal?

Thanks,
Annie.

[factor-fiction]

The employer should deduct tax in the normal way. If she already pays tax then the second job will probably be taxed all at basic rate. If it's self employed work or 'cash in hand' she'll need to declare it- have a look at the HMRC site for what to do

[boxtops]

It's perfectly legal - she might need to contact HMRC at the end of the tax year in order to make sure that she hasn't over/unpaid tax overall. Agree with factor - the tax allowances will apply to the first job, then the second is taxed at basic rate.

[buildersmate]

If she does other paid work as an employee, she will be allocated a BR tax code by the employer. This means that her tax will be deducted at basic rate by the employer, without allowance for persoanl allowance (because her personal allowance will be accounted for in her primary employment).
If she undertakes true self-employed work, she needs to register a SE with HMRC (and pay SE NI contributions).

[New Judge]

If this is to be a long term arrangement, as an alternative she can ask HMRC to “split” her tax code. Assuming she earns about £5k from her work experience she can ask for a code of 500 to cover that without tax being deducted. The remainder of her personal allowance (which is £7450 in total, so £2450 is left) will result in a tax code of 245 which she can provide to her second employer. This means she will only be taxed on anything over £2450 that she earns from her second job and she will not over or under pay her tax for the year.

This usually takes a few weeks to arrange so buidersmate’s answer involving the BR code may be more appropriate if this is to be a short term arrangement. But she will be stopped tax at 20% on all her earnings from her second job and will have to reclaim overpaid tax at the end of the financial year.

[New Judge]

Sorry, personal tax allowance is £7,475, but it makes virtually no difference to my answer.

[factor-fiction]

Hi New Judge- I've never understood the reason for wanting to split the tax allowance between jobs. I am not sure why splitting the tax allowance reduces the risk of overpayment of tax. I can't see the problem if the first job is taxed in the normal way taking account of allowances and the second job is taxed at basic rate- I am not sure how this might result in overpayment of tax.

However I am wondering why she is already on PAYE. I would have thought job experience (which is often not paid particularly well) for 16 hours a week might well pay a little less than the current personal allowance

[New Judge]

Splitting your tax code is useful in avoiding overpaid tax if you have more than one source of income, factor, and both of them are below the personal allowance (currently £7,475).

Let’s say I have job number one which brings in £5,000 and job number two bringing in £4,000. On earnings of £9,000 the tax due is 20% of my pay above £7,475 (which is £305).

If I give the first employer a tax code covering my full personal allowance (745) I will pay no tax via that job. But my second employer will deduct 20% from all my pay (he will use the “BR” code as outlined by buildersmate) so I will pay £800. This leaves me the hassle of getting£495 back some time the following summer.

If I split my code, I get the taxman to provide a code of 500 to employer No. 1, covering my £5k. He gives employer No.2 a code of 247 (the balance of my allowance). He therefore only deducts 20% tax from (£4,000 - £2,470) which amounts to £306. (The £1 discrepancy arises because the tax codes are in multiples of £10 and the personal allowance has an odd £5).

It’s only of use when both incomes are below the personal allowance. If any one of them exceeds this tax is due on all of the second at 20%, so there is no point.

Like you I am inclined to think that there may not be an issue for annieigma’s daughter.

[factor-fiction]

Yes I agree, New Judge, in those situations that it is better to split the allowance. I thought you were suggesting it was always better to split them

[factor-fiction]

Yes we agree Eddie51- it is btter for thos epeople whose total income is below the threshold for income tax.
In the OP's case her daughter is already paying tax so I'm asssuming her earnings are already above the threshold and in those circumstances I wouldn't see any benefit in splitting the allowance.