Understanding Tax on Second Jobs

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Tax on Second Job

In the United Kingdom, many people take on second jobs for various reasons. Whether it is to supplement their income, gain new skills, or pursue a passion, having a second job can impact your tax obligations. 

In this article, we will know the importance of managing tax on second job when you work multiple jobs.

Personal Allowance and Income Tax

Personal Allowance: Each person in the UK has a tax-free Personal Allowance, regardless of the number of jobs they hold. Anything earned beyond this allowance is subject to Income Tax.

What is the meaning of Second Job?

Second jobs are often referred to as “side hustles”. These may include:

  • Working evenings or weekends.
  •  Pursuing a hobby or passion.
  •  Self-employment alongside a main job.

Tax on second job

Your main job typically uses the 1257L tax code (assuming it pays more than the Personal Allowance).

Your tax on second job will have one of the following tax codes:

  • BR: All income from the Tax on second job at the Basic Rate (currently 20%) for taxable income between £12,571 and £50,270.
  •  D0: If your combined salary exceeds the £50,270 threshold for the Higher Tax Rate, you will pay 20% tax on the first £270 of your second job’s salary for Tax on second jobTax on second job, in addition to 40% on the remaining taxable salary.
  •  D1: If your combined salary falls into the Additional Rate band, you will pay 45% tax on the second job’s earnings above the threshold.

Registering for Self Assessment

If your second job is self-employed and generates over £1,000 in annual profit, you must register for Self Assessment. This ensures accurate tax payments.

  1. Calculating Tax on Combined Earnings

Your total tax liability depends on the income from both jobs. If your combined earnings push you into a higher tax bracket, you will pay accordingly.

Avoiding Pitfalls

Here are some risks and pitfalls that you should avoid:

  • Keep track of your earnings from each job.
  •  Understand your tax codes and thresholds.
  •  Register for Self Assessment if needed.

What are my rights when working a second job?

Your rights when working a second job depend on your employment status and the specific policies of your current employer. Let us check out  some key points:

Disclosure to Your Current Employer:

  • As per law, you are not required to inform your current employer about taking a second job. However, transparency is advisable to avoid misunderstandings.
  • Many companies do not mind employees having another job as long as it does not impact their performance or create conflicts of interest.
  • Consulting both employers can lead to a more flexible schedule that allows you to manage your time effectively.

Conflict of Interest:

  • While federal law does not prohibit moonlighting, there are laws regarding conflict of interest.
  • If both jobs are in the same industry or involve direct competitors, it may violate your employment contract.
  • Be cautious about using insider knowledge from one job to benefit the other.

Breach of Contract:

  • Having a second job itself does not violate any laws, but it might breach your current employment contract.
  • Check your company’s policy and employment contract to ensure moonlighting is allowed.

State-Specific Regulations:

  • State labor laws may impose limits on restricting employees from working a second job.
  • Employers can legally limit moonlighting if it interferes with primary job duties.

Rights and Contracts:

  • Regardless of whether it is your first or second job, you are allowed to some rights at work.
  • Almost all workers in the UK are entitled to at least the National Minimum Wage or the National Living Wage (if you are 23 or more).

Conclusion

Navigating tax obligations for a second job can seem daunting, but with the right knowledge, you can manage it effectively. Remember to stay informed, declare your income accurately, and seek professional advice if necessary.

Remember, this guide provides general information, and individual circumstances may vary. Always consult with a tax advisor or HMRC for personalized advice.

Some FAQs

Do I need to pay tax on my second job?

Yes, any income beyond your Personal Allowance is subject to tax.

What tax code applies to my second job?

It depends on your earnings. Common codes include BR, D0, and D1.

Should I register for Self Assessment?

If your second job is self-employed and earns over £1,000 annually, yes.

How do I calculate combined tax?

Consider both job incomes to determine your overall tax liability.

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