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Is it Worth Taking A Part-Time Job on A Pension?

By: J.A.J Aaronson - Updated: 13 Jul 2018 | comments*Discuss
 
Part-time Job Pension Tax Paid On

Q.

I took early retirement in 2005 and receive a small pension, with the new government increase on tax to 20% this year, I now pay £30 per month from my pension. However, the government climbdown to 10% will give me a new tax code of 603L. I have been offered a job, albeit only part time 4hrs per day Mon/Fri @ £6.77p per hr. To consider if it is worthwhile me taking, can you tell me what percent I would pay in tax and NI, and would my tax rate state a BR code*.

(Mr I.W., 15 September 2008)

A.

Hello there,

Yours is not an uncommon situation; more and more individuals who derive the bulk of their income from a pension are looking to take on part-time jobs in order to top up this income. However, as you have pointed out, working while retired can have significant tax implications. This is particularly the case for those who receive a private pension, as a part-time job could push them into the next tax bracket.

Personal Allowance

From looking at your tax code, it can be seen that you can currently earn £6,035 per annum before you are required to pay tax. If you were to work in your part-time job 52 weeks per year, you would earn an extra £7,040.80. If you take on a second job, all of your income will be bundled together for tax purposes. As such, the rate of any tax paid on pension income may change if your total income exceeds your Personal Allowance. You have not stated how much your pension income is. However, regardless of this the income derived from your part-time job, would push you over your personal allowance of £11,850 anyway.

The BR tax code appears when the basic rate of tax applies to all of your income. This is almost always the case for those with two jobs, as their personal allowance will have been used up by their primary employment. In your case, even working while retired, rather than working two jobs, the BR tax code will almost certainly apply as your part-time job will use up your personal allowance. As such, you will be taxed on the excess £1,005.80 at basic rate of 20% in the tax year.

National Insurance Contributions

The tax paid on pension income may seem to increase as a percentage, although this will be offset by the extra money you are earning. On its own, the income from your part-time job will not incur a National Insurance liability as it falls below the lowest earnings bracket of £116 per week for primary Class 1 contributions. However, if your total income exceeds this figure, you are likely to be charged Class 1A Contributions at a rate of 12%. This will not apply, however, if you are male and 65 or over, or female and 60 or over. In these cases, National Insurance is no longer levied.

*Figures have been adjusted to relate to the current 2018-19 tax year.

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taxnovice - Your Question:
I have a fulltime job paying £33000 and I started a soletrader business. I made no profit but had £6700 in expenses setting this new venture up.I went to complete my online tax return and it says im due a refund of £45I had assumed that by paying almost £5000 tax on my £33000 job I would be due some where about £1000 refund not £45can anyone clarify this for me

Our Response:
Your £33000 earnings are not relevant to your soletrader earnings and/or expenses.
TheTaxGuide - 23-Jan-18 @ 3:01 PM
i have a fulltime job paying £33000 and i started a soletrader business . I made no profit but had £6700 in expenses setting this new venture up. I went to complete my online tax return and it says im due a refund of £45 I had assumed that by paying almost £5000 tax on my £33000 job i would be due some where about £1000 refund not £45 can anyone clarify this for me
taxnovice - 19-Jan-18 @ 10:25 PM
Harry - Your Question:
Could you possibly advise I am a full time Oolive Sergeant and taxed on my monthly salary. I am looking to start my own business as a dog grooming and behaviourist. This will be aside from working full time. The estimated salary for this would be less than £7000 per annum. Would this affect my current tax and insurance? And what forms would I need to fill in?

Our Response:
You would have to fill in a self-assessment form through the HMRC. You can do this by completing and submitting the paper form SA1, The time limit for registering is six months after the end of the tax year in which you first had the income. Your tax-free Personal Allowance is allocated to your employment, so the tax on your self-employment will be at your own highest tax rate. If your total income is below £41,865, the tax on your self-employed income will be 20%, and if you earn over £41,865 it will be taxed at the higher rate of 40% (income above £150,000 may be taxed at 45%). You would not have to pay extra NI. I hope this helps.
TheTaxGuide - 7-Mar-16 @ 12:37 PM
Could you possibly advise I am a full time Oolive Sergeant and taxed on my monthly salary. I am looking to start my own business as a dog grooming and behaviourist. This will be aside from working full time. The estimated salary for this would be less than £7000 per annum. Would this affect my current tax and insurance? And what forms would I need to fill in?
Harry - 6-Mar-16 @ 3:01 PM
I have just retired and get a state pension and saving credit , would these be affected if I do bank care work which may only be 7.5 /15 hours a month .
millie - 7-Aug-14 @ 10:33 PM
I recently retired at 50 with a £1,060 monthly pension, if I were to take a full-time job at 36hours per week £7 per hour, what would i pay in tax and insurance please or would I be better of taking a job under 16 hours per week
fish - 27-Jan-14 @ 2:35 PM
Hi - at 50yrs of age ( 2009 ), I took my Miners Pension Scheme pension, which at the moment pays me £481.00 per month.Having been out of the industry for 18yrs I have just been taken back on by a private mining company ( Hargreaves ), at Maltby Colliery in Yorkshire.My salaried income without bonus is £31000.00 per annum.The problem I have is that I have been self employed from leaving the mining industry,and paid my stamp contributions in full. I have not worked since accepting my MPS pension in February 2009.What will my tax be ??Yours AJ
aj - 15-May-12 @ 4:48 PM
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