How much tax do you pay on a second job in the UK?

The majority of second jobs use the BR tax code and hence are taxed at the basic rate of 20%. The actual rate also depends on your total income for a given tax year. The actual tax charged could be higher if your income exceeds £50,270. Anything over £125,140 is taxed at 45%.

How is tax applied across two jobs?

While your income earned through the second job is often taxed at 20%, HMRC looks at your overall income when calculating tax due. The applicable tax rates are as follows:

• 0% tax is applicable on income from £0 to £12,570 (Personal Allowance)
• 20% tax on income of £12,571 to £50,270
• 40% tax on income of £50,271 to £125,140
• 45% tax on anything beyond £125,140

Let’s take an accountant who works in a firm and earns £40,000 a year, and has a second job as a private consultant where he earns another £20,000. Thus total income for the year is £60,000. Even after the £12,570 Personal Allowance is applied, some of the income still sits in the higher-rate band. As a result, 40% tax will be applied on at least a portion of the income earned through the second job.

Tax codes for a second job in the UK

HMRC assigns certain tax codes when collecting tax from your second job.

• BR: taxed at the rate of 20%
• D0: taxed at 40%
• D1: taxed at 45%
• 0T for when Personal Allowance is not applied, or HMRC needs more information

Note that these codes are specifically for second jobs, whereas your primary job will typically use the standard 1257L code, which includes the Personal Allowance.

Do I need to file a Self Assessment?

You may not need to fill in a Self Assessment tax return if you don't have untaxed income or any other income that is not credited outside of the PAYE system.

You might, however, have to make a tax return if:

• You are self-employed, freelance, or act as a consultant.
• Your self-employed income surpasses the threshold of £1,000 per annum and is not taxed via PAYE.
• You earn rental income.

Rental income is not like a salary that gets taxed through the PAYE system. Thus, submitting a Self Assessment return is the only way you can ensure HMRC has information about your income to apply the correct tax.

Can I split my Personal Allowance?

For employment where the entire allowance is not used, employees can request that HMRC transfer the balance to the second job. For example, if income from your main job is £9,000, you can request HMRC to carry forward the balance of £3,570 to your second job to reduce the tax payable on this income.

A few important points to note

• When starting a second job, you will not have a P45 form, as you are still employed and have a primary job. Therefore, you need to fill out a New Starter Checklist for your new employer.
• Look out for the amount of tax deducted from your total income by closely monitoring all your payslips.
• Report any significant changes in your income to HMRC to avoid underpayment or overpayment of tax.

How Abbott and Brown helps with multiple income sources

Multiple income sources could mean more complications when it comes to managing your taxes. If you haven't notified HMRC of your new income or if your tax codes are incorrect, this could mean you're paying too much tax or HMRC is collecting the wrong amount of tax

Our specialists at Abbott & Brown handle the problem of how to manage taxes efficiently from many income sources. We’ll check your earnings and let HMRC know if there’s any changes in your income, so you get the right tax code.

Additionally, we also help with a range of other accounting services, such as Self Assessment, VAT, MTD compliance and much more.

If you have any more doubts about tax on multiple income sources or need expert-guided tax advice, get in touch for a free consultation.

FAQs

Q1. Do I pay more tax just because I have a second job?

Having another source of income does not automatically mean paying more taxes. As with all taxes, income tax is based on the sum of all income, but your second job will typically be taxed from the first pound earned, as your Personal Allowance will most likely be applied against your main source of income.

Q2. Do I have to tell HMRC about my second job?

If you are employed in both jobs and paid through the PAYE system, HMRC will usually update your tax codes automatically to ensure that the correct amount of tax is deducted from each employment. However, if you are self-employed or receive other untaxed income, you may need to complete a Self Assessment tax return.

Q3. Do I get a personal allowance on my second job?

There’s no special Personal Allowance allocated to second jobs. However, if the Personal Allowance on your first job is not fully used, the balance amount can be transferred to earnings from your second job.

Q4. Will I get a tax refund for my second job?

Yes, if your tax code has been applied incorrectly and your net income is lower than HMRC estimates, you may receive an automatic refund at the end of the year. You can also contact HMRC mid year to address this.

An incorrect tax code could result in underpayment or overpayment of tax. In most cases, the mistake will be corrected at the end of the tax year, but it is advisable to notify HMRC as soon as possible if you believe your tax code is incorrect.