How much tax will you pay if you take a second job?

Out of a total UK workforce of more than 30m, about 1.18m of us have a second job, according to ONS figures. Over the past 20 years, the number of people with a second job, either…

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Out of a total UK workforce of more than 30m, about 1.18m of us have a second job, according to ONS figures. Over the past 20 years, the number of people with a second job, either through choice or necessity, has been rising steadily.

Maybe you already have a full-time or part-time job, but you’re considering taking another one to boost your income. You may be wondering whether you have to let HMRC (the UK tax authority) know about your second income and how much tax you will pay. Read on to find out.

How will HMRC find out about your second job? 

When you leave a job, your employer should give you a P45, a slip of paper that details key facts such as your date of birth, name, address, National Insurance number, tax code, tax paid on your salary so far in the tax year, etc.

If you’re not leaving a job, just starting to work for another employer, you’ll need to complete a Starter Checklist for PAYE and send or give it to your second employer so they can work out your correct tax code before adding you to their payroll. Alternatively, your new employer may send you a paper Starter Checklist for PAYE to complete.

A tax code enables employers to know how much tax-free income you can earn, so that they can deduct the right amount of Income Tax and National Insurance contributions (NICs) from the rest of your earnings.

Need to know! As an employee, you do not have to contact HMRC about your second job. HMRC will find out when your second employer registers you for tax via their payroll.

How much tax will you pay on your second job?

HMRC will consider one job as your main income source and you’ll get a personal allowance for this. The standard Personal Allowance for 2021/22 is £12,570 and you don’t pay tax on earnings up to this amount. If you claim Marriage Allowance or Blind Person’s Allowance it will further increase your tax-free earnings.

Earnings over the Personal Allowance threshold are subject to Income Tax at:

  • Basic rate – 20% on earnings between £12,571 and £50,270.
  • Higher rate – 40% on earnings between £50,271 and £150,000.
  • Additional rate – 45% on taxable income of more than £150,000.

You do not get a Personal Allowance on taxable income over £125,140.

Need to know! It’s best to have your Personal Allowance applied to the job that pays you the most money. If you earn less than £12,570 from both of your jobs, to minimise how much tax you’ll pay, ask HMRC to split your Personal Allowance across both jobs.

Second-job earnings are often taxed using a BR (ie basic rate) tax code, which is 20%. But if your second job is very well paid, your tax code can be D0 (higher rate) or D1 (additional rate), which means you’re paying tax at a higher rate (40% or 45%).

What about National Insurance contributions?

If you earn more than £184 a week in the 2021/22 tax year, you’ll have to pay Class 1 National Insurance contributions (NICs). If you earn more than this figure in each of your jobs, you’ll pay NICs on both at:

  • 12% on earnings of £184 to £967 a week (£797 to £4,189 a month)
  • 2% on earnings of more than £967 a week (£4,189 a month).

Your employers deduct your Class 1 NICs from your earnings and pay them to HMRC on your behalf.

What if you set up a business to earn more money?

Rather than take another job, many people now start their own part-time business (sometimes called a “side-hustle”) to supplement their main or day jobs. If you set up a self-employed business (rather than a limited company), unless earnings are less than £1,000, you’ll need to register for Self Assessment with HMRC.

Self Assessment is the system HMRC uses to collect tax from self-employed people. Each year, you must complete and file a Self Assessment tax return (service providers will do it for you), detailing your earnings and costs, so that the Income Tax and NICs that you owe can be calculated. You must then pay these directly to HMRC.

Need to know! You can get up to £1,000 each tax year in tax-free allowances for property or trading income. If you earn income from both sources, you’ll get a £1,000 allowance for each. If your annual gross property income is £1,000 or less, you don’t have to tell HMRC or declare this income on a tax return.

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