PAYE job as well as self-employed/contracting

[potential contractor]

I have a job where I am a PAYE employee and now have an opportunity to take a second, part-time job and I would like some guidance on taxation in such a position. I am a 40% marginal tax payer and (unfortunately!) this second job is not going to push me into the 50% tax band.

I presume I can not be PAYE at both places?

If I go self-employed on the part-time job, do I have to pay the full national insurance - so the tax burden would be 40% plus NI - ie over 50%?

Could I set up a ltd company and invoice the 2nd job through that? If so, do I have to pay myself the 8k salary when being at 40% marginal anyway? Would I have to own any of the shares in the ltd - ie can my wife be the owner and be the one getting any dividends?

As I am already PAYE with one firm would the issue of IR35 be relevant at all?

Would like to get an idea of the potential tax situation before starting any negotiations.

Any help and guidance you can give me would be greatly appreciated.

Thanks,
Potential Contractor

[SueEllen]

To answer your questions in any order:
Yes you can set up a limited company for your second role. However it depends on how much you are earning whether it's worth it.
If it is worth it then
a. Set it up before you start working on it so the contract is between the limited company and the client instead of you personally and the client.
b. IR35 is only relevant for the second role. (Do a search on these forums for IR35)
c. As you are 40% tax payer I would leave the money in the business account and talk to an accountant about the best way of getting it out. For example it may be an idea if your wife isn't working to give her all the shares in the company so she gets the dividends.

Otherwise if it isn't worth setting up a limited company then you are just going to have to be self-employed and pay the additional tax and NI on the income via self-assessment.

Do a search on these forums for accountants and go and talk to one to see if it's worth you setting up a limited.

[Clare@InTouch]

You can be PAYE on both jobs, but you'll be taxed at 40% on the second job.

As Sue Ellen says you could look into either self employment or a limited company, with how much you're going to be earning (and for how long) probably being the deciding factor.