Second Job tax - how does tax work with two jobs in the UK?
23rd August 2024
Reviewed by RIFT's Assistant Operations Manager, Helen Lambkin
Reviewed by Helen Lambkin Helen Lambkin LinkedIn
Helen has been part of the RIFT family for over 12 years, and for the last 8 years, she’s been serving as our Assistant Operations Manager. She’s the go-to person for making sure the team is fully...
Read More about Helen LambkinReviewed by Helen Lambkin, Assistant Operations Manager at RIFT Tax Refunds
Whether you’re saving for something special, thinking about changing your career, combatting the increased cost of living or fancy some variety in your working life, there are lots of reasons why you might get a second job.
Whatever it is, having one gives you something to think about on the tax front, especially if you move into a higher tax bracket. So, how does second job tax work? Let’s take a closer look.
Do you need to tell HMRC about your second job?
In the UK, having two jobs is completely legal, as long as your contract with your first job doesn’t forbid it. So before you take on a second job, look closely at your current contract to make sure it’s okay with respect to things like conflicts of interest.
If your first and second jobs are both under an employer, all of your tax should be calculated and paid through payroll. In this instance, you shouldn’t have to tell HMRC about your second job as your new employer should handle this for you.
However, if your second income comes in the form of self-employment, you must handle the tax yourself. You can do this by registering for Self Assessment. This allows you to notify HMRC about your second job by filling in an annual Self Assessment tax return.
Impact of having two jobs on your tax code
Your tax code determines how much tax-free income you can earn before you have to pay Income Tax. For the 2024/25 tax year, the standard tax code for most people with a single job is 1257L, giving you a £12,570 tax-free Personal Allowance.
This tax-free amount isn’t affected by the number of jobs you have. When you get a second job, it’s usually best to apply your Personal Allowance to the job that pays the most.
However, if neither of your jobs has an income above £12,570, you can split your Personal Allowance. In this instance, you will then be assigned:
- A primary job tax code
This is usually for the job that pays the most and will typically be the standard 1257L tax code.
- A secondary job tax code
This is usually for the job that pays the least and will typically be a BR, D0 or D1 tax code.
How much tax do you pay on a second job?
When you get a second job, your secondary tax code will determine how much tax you have to pay.
- BR (Basic rate): If you earn between £12,571 and £50,270, you’ll be taxed at 20%
- D0 (Higher rate): If you earn between £50,271 and £125,140, you’ll be taxed at 40%
- D1 (Additional rate): If you earn over £125,140, you’ll be taxed at 45%
Here are some examples of how much tax you may pay in a range of scenarios.
Example 1: Combined salary below personal allowance
If your main job pays £15,000 and your second job pays £10,000, your main job uses up your Personal Allowance. You then pay the basic rate of 20% on the remaining £12,430 of your total income, made up of £2,430 from your first job and all of your second job.
Example 3: Combined salary pushing into higher tax bracket
If your main job pays £45,000 and your second job pays £15,000, your main job uses the full Personal Allowance and the rest is taxed at 20%. As your total income – £57,000 – exceeds £50,270, this means £6,730 of your second job's income will be taxed at the higher rate of 40%.
Underpaying or overpaying tax
The most common issue with having multiple income streams is the potential for incorrect tax payments.
- Underpaying is where you don’t pay enough tax and face a bill at the end of the financial year
- Overpaying means you pay too much tax and might be eligible for a refund
By regularly checking your tax codes and keeping HMRC in the loop about your earnings, you can avoid both of these things and pay the correct amount.
Other factors to consider
National Insurance contributions
You must pay National Insurance contributions on both of your jobs if you earn above the Primary Threshold (PT) of £242 per week. However, if your income is between the Lower Earnings Limit (LEL) of £123 and the PT, you don’t have to pay but still get the benefits of paying.
Pensions
Having a second job may give you access to another workplace pension. It’s important to track and manage these pensions effectively. You can transfer pensions to a favoured provider whenever you like.
Student loan repayments
If you have a student loan, repayments will be deducted based on your combined income from both jobs. Make sure you monitor these deductions to avoid overpayments or underpayments.
Get in touch with us for help
Thinking of taking on a second stream of income? Maybe you’ve already taken the plunge. Either way, if you have any questions or are unsure about tax with multiple jobs, don’t hesitate to get in touch with us. Our team of specialists are always on hand to help.
Second job tax - FAQs
Do you pay more tax on a second job?
Your tax rate depends on your total income. However, income from a second job can be taxed at a higher rate if it pushes your total income into a higher tax bracket.
Do you pay National Insurance on a second job?
If your total earnings from both your first and second jobs exceed the National Insurance contributions threshold, you will pay NICs on both incomes.
Will having a second job affect my benefits?
Having a second job can affect benefits like Universal Credit and tax credits. Your Universal Credit may decrease by 63p for every £1 earned from your second job, and changes in income must be reported to the Tax Credit Office if you receive Working Tax Credit.