Tax on your second job​

The UK has a total workforce of about 30 million people, and well over a million of them have more than one source of regular income. That number is increasing too but not everyone affected by it is entirely happy about it. Whether they’re having to find extra cash because money’s too tight on their main job or they simply want to expand into other areas of work, more and more UK workers are taking on extra jobs.

There are a few important things to know about second jobs:

One of the basic protections we mentioned above is that you can’t be made to put over 48 hours a week into any one job. If you’re over the age of 18, you can decide for yourself to put in more time than this – but it still can’t be a necessity of the job.

Let's deal with the obvious one first: it's possible to have two jobs without even realising it. A second job is can be classed as anything you make money from in addition to your primary role. This can be anything from:

• renting out a property
• making and or selling online 
• delivery driving such as UberEats or Deliveroo

If you're making over £1,000 a year, HMRC's going to want to hear about the money coming in. Depending on your set-up and situation, you might well owe some extra tax on that cash.

This will generally mean signing up for the Self Assessment system and filing yearly tax returns to report your income and expenses. You'll have strict deadlines to hit, whether or not you end up owing any tax - and there are some pretty nasty penalties in store if you mess things up and don't file or pay in time.

One thing that particularly muddles things up for people new to Self Assessment is that (unlike PAYE) you're paying the tax you owe for self-employment after you've earned it – at least mostly. When you file your yearly tax return, you get a bill for what you owe and a deadline to pay up (the 31st of January). However, HMRC will use the figures in your tax return to estimate the tax you'll owe the next year as well, and make you pay two “payments on account” against it. They basically divide your expected upcoming tax bill in half and make you pay a chunk of it by the 31st of July, then the rest by the following 31st of January. It's actually supposed to make things easier for you, believe it or not, since paying ahead of time in instalments is a little less of a shock to your wallet than coughing up potentially many thousands of pounds at once. Even so, it's one of those tricky little areas of the tax rules that can cause serious headaches if you don't keep your wits about you.

Earning more than £100k? Read this

A lot of people like the idea of being their own boss, but don’t want to risk being self-employed as their only source of income. That’s how a lot of small businesses get their start, as second jobs for people who wok on the books elsewhere. This can be a great idea if you’re cut out for it, but you do need to keep your tax situation under control.

When you’re self-employed, even as a second job, you’ll need to get cosy with the taxman. That means registering yourself with HMRC as self-employed, getting set up for the Self Assessment system and filing yearly tax returns to report all your earnings, expenses and other key details.

Self Assessment comes with some specific dates and deadlines to hit, the most important of which is the 31^st of January. Every year, this will be your deadline for filing your tax return paperwork, along with paying up what you owe.

Guide to UK Tax Returns

The other thing to know before setting yourself up as self-employed is that your National Insurance Contributions (NICs) wont’ magically take care of themselves any more either. You’ll have to pay what you owe for these when you settle up with the taxman each year.

The basic paperwork for your self-employed job will be a little different from your on-the-books work, too. You won’t have a regular payslip sent to you, for one thing. That means you’ll have to keep a tight set of records covering all the money flowing into and out of your business. Self Assessment tax returns are a huge topic in themselves, so make sure you have a good understanding of what’s involved before diving in.

So, are you an on-the-books employee with a self-employed side gig or a small business owner who moonlights PAYE for someone else? Generally, it’s probably best to class your “main job” as the one that brings in the most money. Either way, you’ll be paying a year in arrears for your self-employed work. That means, for example, that the profits your self-employed business made in 2021/22 will factor into the eventual tax bill you’ll pay up by the 31^st of January 2023. This is something that trips up a lot of people when they’re new to Self Assessment. Instead of the tax trickling out of your pay each month through the PAYE system, your self-employment tax for the entire year will all fall due in a big lump. Tax years run from the 6^th of April to the 5^th of the following April, though, so you’ll know 9 months ahead what you’ll have to cough up.

Important financial dates & deadlines

When you're working one of more PAYE jobs, your Income Tax and National Insurance Contributions (NICs) are handled automatically. Basically, a chunk of your cash gets carved off and sent to HMRC before you're even paid. It's tempting to assume that you don't need to worry about it, since it's all out of your hands anyway – but it's not that simple. It comes down to your tax code, and in the taxman's eyes it's entirely your fault if something goes wrong with it.

Pretty much everyone paying tax in the UK gets a Personal Allowance. That’s the amount of money you can make in a year before paying any Income Tax on it. So, for instance, most people get a Personal Allowance of £12,570 for the 2022/23 tax year.

A Personal Allowance is linked to a single job, and you only get one. That’s why it’s generally going to be a good idea to make sure it’s linked to the job that pays you the most. Your second job will be taxed from the very first penny it brings in. If you have a job that pays under the Personal Allowance threshold, attaching your Personal Allowance to it means you won’t be getting the full benefit of your tax-free allowance. On the other hand, if you’ve got two jobs and neither pays more than the Personal Allowance, you can arrange to have it split between them.

Let’s put it in real terms. Dana has a main job paying £15,000 a year, and a second one that only brings in £5,000. Assuming she pays tax at the English, Welsh or Northern Irish rates, she’ll pay 20% Income Tax on the £2,430 from her main job that’s over her Personal Allowance. She also pays out 20% from everything she makes in her second job, since there’s no Personal Allowance attached to that. If her Personal Allowance were linked to her other job instead, she’d be wasting a massive £7,570 of it.

Another thing to watch out for when you’ve got more than one job is your tax band threshold. If your combined income from both jobs comes to over £50,000, you need to let HMRC know about it. The tax band you’re in will depend on the combined total income from all your jobs, but if you don’t talk to the taxman, then you’ll only be taxed at the basic rate on everything. If some of your income falls into the higher rate band, you’ll end up owing a chunk of extra tax at the end of the year.

How earning £100k impacts your personal allowance

If you’re paid for any of your jobs through the PAYE system, then that job will have a tax code attached to it. This lets HMRC know some important things like which job your Personal Allowance is linked to.

When you tell HMRC you have another PAYE job, you’ll get a New Starter Checklist to fill out. You’ll get this from your new employer. Pay attention to your tax code paperwork. Being on the wrong code can seriously affect the amount of tax you’re paying, and it’s down to you to get any mistakes sorted out—even if they weren’t yours! Getting caught on the wrong tax code can leave you with fines, pumped up tax bills and interest to pay.

If your main PAYE job pays more than the Personal Allowance you qualify for, you’ll get a tax code of 1257L for it (as of 2024/25). All this code means is that you've got a personal allowance of £12,570 and won't start paying tax on anything you earn below that. The letter at the end of this particular tax code confirms that no special circumstances apply for this job.  Your second job will get a BR, D0 or D1 code instead, depending on which tax band your combined income falls into.

If you’re making a combined total of over £190 a week, you’ll also be paying National Insurance on your income from both jobs. Keep this in mind, since it’s important to remember that there’s more than Income Tax to factor into your tax budgeting.

Okay, but what if both of your jobs pay less than the Personal Allowance you're entitled to? Well, in that case you need to get things sorted out fast before they cost you money. Let's imagine your main job in 2024/25 pays you £12,570 and your side-gig pays £8,000. Applying your Personal Allowance to the main one means you're losing the benefit of £570 of it. If things go really wrong and your allowance gets slapped onto your second job, you're missing out on a whopping £4,000 of it! When this kind of thing happens, you need to get in touch with HMRC as quickly as possible. They've got a system for splitting your Personal Allowance between your jobs so that you don't end up paying too much tax overall.

It's worth pointing out that splitting your Personal Allowance might not be the best idea if the income from your PAYE jobs isn't predictable. If one of your gigs suddenly takes off and pays a lot more than expected, you might end up with the taxman sniffing around your circumstances because you've underpaid.

Let's say you've got a main job paying £35,000 a year and another one paying £20,000. Not too shabby overall, you think. However, if you don't square things with HMRC you might be looking at some trouble when they catch up to you. In total, you're making enough for some of your income to be taxed at the higher rate. Despite that, since your earnings for each job are below that threshold individually, you're only being taxed at the basic rate on each (after your Personal Allowance, of course). Again, you have to talk to HMRC to get this sorted out and prevent some tense situations with the taxman.

Read our guide to tax codes

If you qualify for tax credits or some other kind of benefit, taking on another job can obviously knock a hole in what you can get. With Universal Credit, for instance, the amount you claim drops as the amount you earn rises. You might be eligible for a work allowance, which is a bit like the Personal Allowance you get for Income Tax. If you're taking care of a child or have circumstances that limit how much you can work, you might qualify for an allowance of £287 if your claim includes housing support or £503 if it doesn't. Anything you earn below your allowance won't bring down your Universal Credit. After that, though, your UC payments will drop by 63p for every £1 you're earning.