According to Royal London, 5.2 million people in the UK have a second job, and a further 10 million people plan to get one in the future. Many people have to take on another job to help them cover the cost of living, whilst others choose to work in a second role to expand their repertoire of skills.
Starting a second job at another company or starting a new self-employed role in addition to your main job can affect how much tax you pay. It's important that you know how much tax you should be paying so that you aren't under or overcharged.
It's a common misconception that you must pay more tax for a second job, but this isn't entirely true. Your increased tax rates reflect the overall increase in your combined salaries. This may mean you are taxed more because your salary falls in a higher tax bracket.
In this guide, we'll look at what counts as a second job and how much tax you are expected to pay based on your earnings.
Individuals have one tax-free Personal Allowance each year, no matter how many jobs they work. Anything that you earn over this allowance is subject to Income Tax, no matter which job the salary is from. If your combined pay from both jobs exceeds your tax allowance, you will face tax on the remaining pay.
Your second job may push your salary into a higher tax boundary. If this happens, you will have to pay one lot of tax on the earnings from your first job that fit into one tax boundary and a second amount of tax on the earnings you make over the threshold in your second job.
Continue reading to learn more about tax boundaries and how Income Tax is calculated.
Second jobs are often called 'side hustles'. Most people schedule their second job around their main job, which means they may work in the evenings or at the weekends. Side hustles are usually based on someone's hobby, although they can be anything.
For example, someone may work in IT for their main full-time job and run a self-employed clock-repair business in their spare time. Alternatively, there may be a connection between the two jobs. Someone may work as a hairdresser in a highstreet salon during the week and as a self-employed hairdresser at home during weekends.
Some people have a second job to earn more money or to expand their skillset alongside their current job. They may be employed by a second company or are self-employed. The tax you pay will depend on how much you earn in each of your jobs and your personal allowance.
Do I need to tell HMRC I have a second job?
You must register for Self Assessment if you start a second self-employed job and make over £1,000 profit annually. This helps HMRC ensure that you are paying the correct amount of tax. You don't need to tell HMRC and register for Self Assessment if you earn less than £1,000 each year in your self-employed role.
The tax code for second jobs is usually BR, which means that all income from the job is taxed at the Basic Rate. The Basic Rate is currently set at 20% of taxable income between £12,571 to £50,270. The other tax bands are listed below:
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,570||0%|
|Basic rate||£12,571 to £50,270||20%|
|Higher rate||£50,271 to £150,000||40%|
|Additional rate||over £150,000||45%|
The Personal Allowance for workers in the tax year 2023/24 is £12,570 (the same as in 2022/23), whether you have one job or multiple. This means that you can earn up to this allowance before you have to start paying Income Tax on your earnings.
If you earn over £12,570 in your first job, you won't have a tax-free allowance for your second job. For example, if you earn £21,000 in Job A, you must pay 20% on the remaining £8,430. If you earn £6,000 in your second job, you will have to pay 20% on those earnings too.
You can split the Personal Allowance if you earn less than £12,570 in each of your jobs. For example, you could earn £12,000 in Job A and £4,000 in Job B, which are below the tax threshold. You would have £570 unused allowance from your first job, which you can ask HMRC to transfer to cover the first £570 from your second job. Alternatively, you can wait until the end of the tax year and ask for a refund from HMRC for your overpaid tax.
If your combined earnings from both jobs are over £50,000, you must notify HMRC. They usually view your main job as the role you earn more money from. Your Personal Allowance is applied to your main income, and the rest will be taxed at the higher rate.
Earnings from your second job may be taxed at the higher rate (with the code D0) or the additional rate (D1) if you earn a high income. This means you will be taxed at either 40% or 45% on your second income.
You must pay National Insurance contributions on your earnings if they are over £242 per week. The rate is 12% for Class 1 contributions. Self-employed individuals must pay Class 2 and 4 contributions on profits.
You will have to pay both Class 1 contributions on your salary and Class 2 and 4 contributions on your profits if you are employed and have a second self-employed job. The amount you pay will depend on the combined wage from your two jobs. After filing your Self Assessment tax return, HMRC will tell you how much National Insurance contributions you have to pay.
It's not illegal to work multiple jobs at the same time. However, starting a second job could breach the conditions set out by your first job.
Employers often include a clause in their employees' contracts prohibiting them from working a second job in the same industry as their first job. Some contracts even prevent employees from working any other job, no matter what industry it is based in. This is because employers want their workers to dedicate their time and energy to their first job and to ensure it is their first priority.
It's the responsibility of both employers (if you're not self-employed) that you don't exceed the maximum weekly work limit, which is an average of 48 hours a week. This ensures you are healthy and alert enough to perform your role properly and safely.
Before you start a second job, you should check your contract and speak to your employer. They may object to you working in a second role entirely or the number of hours you intend to work. Even if you can work in a second role, most contracts require employees to notify their company if they intend to take on a second role at another company.
Your employer could instigate legal proceedings if they find out you are working another job. They could even dismiss you if it's discovered that you have breached the clause concerning secondary employment in your contract.
Every worker in the UK is given a Personal Allowance of £12,570. This means you don't have to pay any tax on earnings up to this limit. The tax you pay on your primary and secondary income after this allowance is based on how much you earn. If your combined salaries push your earnings into a higher tax bracket, you must pay a higher tax percentage on your second salary.
Below are three examples of how Income Tax is calculated for second jobs:
Adam works two jobs. In Job A, he earns £15,000 annually; in Job B, he earns £5,000 annually. The entirety of Adam's Personal Allowance is applied to his primary job, which means he pays 20% on his remaining £2,430 earnings in Job A.
He must also pay 20% on the entire £5,000 earned in Job B. This is because Adam only has one Personal Allowance, which was applied to his primary job. As such, he has no tax-free allowance left and must pay the Basic Rate on the remaining income. Adam must pay 20% tax on his £5,000 income from Job B and the remaining £2,430 income from Job A.
Bella has two jobs. In Job A, she earns £9,000; in Job B, she earns £7,000. Both income amounts fall below the Personal Allowance threshold. This means that Bella can contact HMRC and ask for her Personal Allowance to be split across the two jobs.
She would have £3,570 Personal Allowance left over from Job A (£12,570 - £9,000 = £3,570). Bella can therefore earn £3,570 income tax-free in Job B before she must start paying Income Tax. Bella must pay 20% Income Tax on the remaining £3,430 earnings from Job B.
Chris has two jobs. He annually earns £43,000 in Job A and £12,000 in Job B. The wage for his first job is under the £50,270 threshold for the Higher Rate tax category. However, the combined wage of the two jobs is £55,000, which is over the Higher Rate threshold. This means Chris will have to pay the Higher Rate on eligible earnings from his second job.
Chris has to pay 20% on any income over £12,570 in Job A. He also has to pay 20% on the first £270 from Job B, as well as 40% on the remaining £11,730.
You could contribute a higher rate to your pension to reduce your taxable income. Pension contributions are paid at the net amount, which is 80% for a basic tax rate payer. However, the government offer 20% tax relief, which essentially makes your contribution tax-free. For example, for every £1 contribution, you are only charged 80p as the government contributes the additional 20p.
Another pension option is to ask your employer to enter you into a salary sacrifice contribution arrangement. This is especially effective if the deducted contributions reduce the amount of money you would otherwise be taxed at a higher rate.
One of the benefits of pension contributions via salary sacrifice is that your employer may pay the savings from the unpaid National Insurance contributions into your pension pot.
You should ensure you're on the right tax code for your two jobs. Your tax code affects how much tax HMRC deducts from your salary. If you're on the wrong tax code, you could be over or underpaying your tax.
It's a good idea to consult a tax advisor to find out how you can manage your tax contributions for your main and second jobs.
How does a second job affect my benefits?
Several factors, including household income, influence eligibility for benefits and tax credits. Your benefits may be affected if you have a second job, as it could increase your overall income, which could push you outside of the eligibility boundaries.
It's important that you notify HMRC and Jobcentre Plus if your income changes in any way (such as starting a second job).
What should I do if I am paying too much tax?
If you think you are paying too much tax, you will need to contact HMRC. You may be eligible for a tax refund if you have overpaid Income Tax. HMRC can also change your tax band if you are in the wrong one.
You can check if you're paying the correct amount of Income Tax by using the government's free calculator. It can tell you how much Income Tax and National Insurance contributions you should pay based on your salary. You can also log into your personal tax account on the government website and see how much tax you paid in previous tax years.
How can I apply for a tax refund?
HMRC will send you a P800 letter if they notice you have paid too much tax. The letter will tell you how to reclaim your overpaid tax. If you haven't received a P800 letter, it may be that HMRC hasn't calculated your tax yet. You can contact HMRC if you think you should have received a letter and haven't.
The amount of tax you pay on earnings from a second job depends on how much you earn in that role and in your main job. If you earn below the Personal Allowance in each job, you can split your Personal Allowance across the two salaries. However, your Personal Allowance can only be applied to one salary if you earn over £12,570 in your main job. This means that the entirety of the salary from your second job is subject to the Basic Tax Rate (20%).
If your combined salary is over the £50,270 threshold for the Higher Tax Rate, you must pay 20% tax on your salary over £12,570 in your main job. You also have to pay 20% tax on the first £270 from your second job's salary, in addition to 40% on the remaining taxable salary from your second job.