Second job tax and pay

One of the first questions you need to ask yourself is if your existing contract of employment lets you take on a second job.

You should have been given a copy of your contract when you started working for your employer. If you don’t have one, your employer or HR department should be able to provide you with one.

Your employer might rule out you taking on extra jobs in situations where:

• there might be a conflict of interest, for example working for a rival company
• your second job might bring your employer into disrepute.

If you’re not sure, check your contract. If there’s nothing about second jobs stated in it, your employer can’t prevent you from taking another job.

Depending on your employment status, you’re entitled to rights at work, regardless of whether it’s your first or second job.

Whatever your employment status is – if you’re employed by someone else, you should have an employment contract.

This should set out, among other things:

• job title
• responsibilities
• pay
• hours of work
• the benefits you’re entitled to.

Almost all workers in the UK are entitled to be paid at least the National Minimum Wage – or the National Living Wage if you’re 23 or over. From 1 April 2024, it will also apply to workers over the age of 21.

By law, your employer can’t ask you to work more than an average of 48 hours a week in a single job.

However, if you’re over 18 you can choose to work more hours than this. And you might need to if you want to take on a second job.

If you’re working, you’re entitled to earn a certain amount of money without paying Income Tax. This is called the Personal Allowance and is £12,570 for the 2023/24 tax year.

You only get one Personal Allowance – so it’s usually best to have it applied to the job paying you the most.

If you work two jobs and neither income is above £12,570, you can split your Personal Allowance.

Jane works two jobs. Her main job pays £14,000 a year, and the second £6,000.

Her whole Personal Allowance is applied to her main job. If she lives in England, Wales or Northern Ireland, she pays Income Tax at the basic rate of 20% on the £1,430 of her pay that’s above the allowance for her main job - – and on all her income from her second job

Richard has two jobs. His main job pays £10,000 a year and his second £9,000.

Both of these are below the Personal Allowance, so he can split his allowance between the two jobs.

He can contact HMRC and get them to transfer £2,570 of unused allowance from his main job to his second job. Or he can wait until the end of the tax year, and ask HMRC for a refund.

You should only ask for your Personal Allowance to be split if your income from each job is predictable and stable. If it’s not, and one job ends up paying you more than expected, you’ll have underpaid tax.

Rebecca’s main job pays her £45,000 a year. But she also has a part-time job paying £12,000 a year. This means she has a total income of £57,000, with all her Personal Allowance being applied to her main job.

Unless Rebecca tells HMRC this, her second job will be taxed entirely at the basic rate, when some of it should be taxed at the higher rate.

If she doesn’t tell HMRC this, she’ll have to pay extra tax at the end of the tax year.

It’s important to check your tax codes. This will help make sure you’re paying the right amount of tax and don’t get unexpected tax bills, penalty charges and interest.

Your main job, assuming it pays you more than the Personal Allowance, should be 1257L for the 2023/24 tax year.

Your second job should have a BR, D0 or D1 tax code, depending on whether or not it’s taxed at the basic, higher or additional rate.

You can find your tax code on your payslips.

You can tell HMRC about starting a second job using the new starter checklist from your new employer.

If you earn above £242 a week in the 2023/24 tax year, you’ll have to pay Class 1 National Insurance contributions.

If you earn more than this in both of your jobs, you’ll pay National Insurance contributions on both jobs.

Taking a second job can affect your tax credits or other benefits. So you need to work out how much extra you’ll be earning.

If you’re claiming Universal Credit, and aren’t getting the work allowance, your payment will go down 63p for every £1 earned.

If you’re still claiming Working Tax Credit, you’ll need to tell the Tax Credit Office if your income changes by more than £2,500. But this might count as a change in circumstances and could mean you have to make a new claim for Universal Credit.

Taking a second job might give you the opportunity to pay into another workplace pension scheme. But remember to keep track of any small pensions you’ve paid into.

If you pay a small amount into a pension in your second job, it might be worth combining it with a larger pension when you leave.

If you’re already receiving your State Pension, or you have a private or occupational pension, and you work as well, it can have tax implications.

Again, it’s important to make sure you’re paying the correct amount of tax and have the right tax code.

If you’re working your second job as self-employed, you’ll need to:

• register as self-employed with HMRC
• file a Self Assessment tax return by 31 January each year
• pay your own tax and National Insurance contributions.

As you’re self-employed, you won’t get a payslip. So you’ll have to be careful about your tax code on your other job.

Usually, the job paying you the most should be classed as your main job.

However, if your second job is self-employed you might not know exactly how much you’re earning. This makes it potentially difficult to make sure your full Personal Allowance is being taken.

If both jobs are paying you below the Personal Allowance, you’re still entitled to split your allowance between them.

If one of your jobs is self-employed, you’ll pay tax and National Insurance contributions a year in arrears.

For example, for the money you earned in the 2022/23 tax year, you’ll need to pay the outstanding tax and National Insurance contributions by 31 January 2024.

This means it’s important you think about how you’ll pay what could be a substantial bill. The good news is, you should have an idea about how much tax you’ll owe at the end of the previous tax year. This gives you nine months to prepare.