Getting a second job is something many employees want to do in order to enhance their income. But second job tax, how much you’d pay from your extra job, and potential objections from your employer may be a concern.
Our guide looks at some of the practical aspects of getting a second job. We’ll help you understand how a second job can affect your main role, and how tax on two jobs will impact your income.
How Much Tax Do You Pay on a Second Job?
One significant aspect to consider when taking on a second job is how it impacts your tax situation. Just as with your first job, any income from a second job is also subject to tax.
Once you are sure your contract permits a second job, you need to decide if it will be viable in other ways. This means considering the amount of tax you will owe on your second income.
In the UK, Her Majesty’s Revenue and Customs (HMRC) typically designates one job as your primary income source. This is the job against which your personal allowance is offset.
This means your overall income, including that from your second job would be taxed as follows:-
- The first £12,570 of your income is tax free, known as the “personal allowance”.
- Income from £12,570 to £50,270 is taxed at 20%, known as the basic rate.
- Income from £50,271 to £125,140 is taxed at 40%, known as the higher rate.
- Income above £125,140 is taxed at 45%, known as the additional rate.
Source: HMRC UK Tax Rates, data correct as at June 2023.
For a second job, there’s no personal allowance. That means all income from the second job is taxed, and the tax rate depends on your total income.
For example, if you’re earning £30,000 from your main role and £10,000 from your second job, your total income is £40,000. The first £12,570 from your first job would fall within the personal allowance and be tax free, then the remaining £17,430 from the first job and the £10,000 from the second job would be taxed at the basic rate of 20%.
National Insurance Implications
Unlike income tax, National Insurance Contributions are calculated separately for each job you have.
Current UK NI rates are:-
- 12% of your weekly earnings between £242.01 and £967
- 2% of your weekly earnings above £967
Because National Insurance is calculated separately for each job, you may end up paying contributions in your second job even if your total income from both jobs is less than the £242.01 per week threshold.
Source: HMRC NI Rates, correct as at June 2023.
Second Job Tax Code
You need to ensure you are on the correct tax code for any second job. This code is sometimes referred to as a Basic Rate code.
You will be placed on the BR code if you will be taxed 20% on your second income. If, however, you earn more than this then you might be placed in a higher tax bracket. If you will be earning over £50,271 per year, then you will owe more than 20% tax.
Be Aware of Under or Over Payment of Tax
You need to keep a careful eye on finances when it comes to paying your taxes. It is very common for people to be under or overpaying on their tax payments.
The following scenarios can lead to a mistake in taxes owed:-
Sometimes you may accidentally be given two tax free allowances. When you have a second job, there should be no personal allowance.
This happens when HMRC are not aware of your second employment so you end up with a standard tax code for both. An error of this nature means you are then awarded a personal allowance on each income which will lead to an underpayment of tax.
This will need to be paid back as soon as the mistake is realised and could prove costly and inconvenient if the mistake has been missed for a long time.
You might find yourself on the wrong tax code which means you are paying the incorrect amount of tax. You will most likely be underpaying and will end up having to pay back the difference.
This happens when you are placed on the Basic Rate tax bracket for each job. However, in reality, your second job pushes your income into a higher bracket. Once you realise the mistake, you should contact HMRC immediately.
It may be that your combined salary for both jobs is still less than the personal allowance of £12,570. You may find you have been paying too much tax and are owed a rebate.
This does happen and when it does, HMRC will process the refund once they have processed the paperwork.
There is an HMRC help page which tells you whether or not you can apply for a rebate.
Getting a Rebate if You Overpay Tax on Second Job
If you find yourself requiring a tax rebate, there are practical steps you can take. These rebates are not always done automatically.
HMRC sometimes will issue a rebate without you doing anything but this is not always the case. Sometimes you need to make the claim yourself which you can do online. It is vital that all individuals keep a very close eye on their finances to ensure they are not over or underpaying taxes.
How to Avoid Paying Emergency Tax
There are steps you can take to ensure you do not pay the wrong amount of tax, including emergency tax. Understanding these steps can ensure you are on the right footing from the beginning.
You need to ensure when you begin a new job that you fill in a New Starter Form. This was formerly known as a P46. This should be something your new employer is aware of and asks you to fill in. This will tell HMRC which tax code you should be placed on and avoids using an emergency one.
As long as HMRC are aware of your two jobs, they will place you on the appropriate tax codes. Not telling HMRC can lead to all sorts of problems and confusion.
If Your Second Job is Self Employed
What happens if your second job is a self employed role?
When you are self employed you are in charge of your own taxes. This means registering with HMRC as self-employed and filling in annual self assessments. You are obliged to fill in a self assessment even if you earn under the personal allowance threshold.
This provides HMRC with the figures they need to ensure you are paying tax when it is owed. HMRC carry out regular random inspections so it is essential to keep on top of your finances.
Being self employed shouldn’t affect your first job unless your contract prevents you from getting one. It also should not affect the tax code of the other job.
Do I Have to Tell My Employer About a Second Job?
In a time where flexible working and part time roles are more common, many are taking on second jobs.
You may wonder though, where do you stand with your existing employer? Do you need to tell them you have a second job or does it depend on the job itself?
It largely comes down to your contract. A contract will sometimes have an added clause requiring a second job to be disclosed. Such clauses might prevent employees from working a second job in the same field.
There are no laws in place that state employees must tell their employers about second jobs. However, if your employment contract requires you to do so, you might be subject to disciplinary action if your employer discovers your other role.
Can my Employer Stop me from Having Another Job?
There are some scenarios where your employer can require that you do not work in another job. It may be included in a clause in your contract of employment, or it may be as a result of other legal obligations your employer has under UK employment and Health and Safety laws.
Firstly, it’s important to understand that employers are required by law to ensure their employees don’t exceed the stipulated legal limit of working hours. This limit is defined in the Working Time Regulations as an average of 48 hours per week, calculated over a 17-week period.
If employees are working beyond this threshold, they need to sign an agreement to opt out of the working time directive. Employers must also ensure compliance with other aspects of the Working Time Directive, including mandated rest periods between shifts, which cannot be waived by employees.
Your employment contract may already include provisions concerning second jobs. Before taking on additional work, it is vital to verify whether your contract has any clauses prohibiting other roles.
Employers often incorporate such clauses to prevent potential conflicts of interest, safeguard sensitive information, and prevent employees from engaging in work with competitive firms.
Violating such a clause by taking on a second job could constitute a breach of your employment contract. This could result in disciplinary action, or even dismissal in some cases.
Under UK employment laws, employers bear a responsibility to ensure the wellbeing of their staff.
This involves ensuring that employees are not overburdened, their workloads are manageable, and they are not experiencing undue mental stress. Undertaking a second job could potentially lead to fatigue, which might, in turn, affect productivity or workplace health and safety.
It can be a concern for employers if they feel staff are fatigued because of working additional hours. This can increase the likelihood of workplace accidents.
Often, an employer who does not allow their employees to take on second jobs, will not allow side hustles either. This will be for all the same reasons as any other second income.
It could lead to poor productivity if staff become more interested in other projects. It can affect the overall morale of staff and their mental wellbeing. While side hustles are usually harmless, sometimes employees may make use of their workplace experience or contacts.
This could lead to the side hustle becoming a competitor to the main employer which many workplaces would see as a threat to their profitability.
It is always best to be open and honest about having a second job. There may be something in your contract that prevents you from taking on an extra job. In most cases though, it should not be an issue as long as WTR is respected.
You will have to pay National insurance contributions on both jobs if you earn over £242 per week per job.