second job
28 Jul

How much tax would I pay if I took a second job, or started a ‘side hustle’?

There has been a substantial increase spanning the vast majority of professions of people taking second jobs or creating a secondary source of income through a side hustle – usually to generate additional income to supplement the shortcomings that their main employment causes.

Figures from The Office of National Statistics provided detail showing that over 1.1 million people in the UK now have a second job, either through choice or necessity. Many companies find taking on people who work relatively short hours to help their needs, as opposed to committing to a more expensive full-time employee.

Whilst there is no law against having a second job, there are several issues to consider to avoid creating any problems with your main employer or for yourself! Consider whether you have the time for another role, taking into account everything from commuting, your workload at your main employment that may cause extra hours and most importantly of all, your home life. It isn’t just about meeting responsibilities; do you have the energy to handle both jobs – the last thing you want is to be over-stretched and increasingly stressed!

second job

How will HMRC find out about my second employment?

So, you’ve decided that you can manage all that comes with taking on a second job. The first thing you will need to do is complete a starter checklist for your new employer, so they can work out your correct tax code as they add you to their payroll.

A tax code enables the employer to know how much of your income is tax-free, meaning the correct amount of Income Tax and National Insurance can be deducted from your earnings.

As an employee, you do not need to let HMRC know about your second job directly, they will find out when your second employer processes you through their payroll for the first time.

How much tax will I pay on my second job?

HMRC will consider one job as your main income, and your Personal Allowance will be used against these earnings. For the current 2021/22 tax year, this allowance is set at £12,570 for the year.

Earnings over the Personal Allowance are subject to Income Tax at:

  • Basic rate – 20% on earnings between £12,571 and £50,270.
  • Higher rate – 40% on earnings between £50,271 and £150,000.
  • Additional rate – 45% on taxable income of more than £150,000.

Second-job earnings are most commonly taxed using a ‘BR’ (basic rate) tax code, meaning all earnings from this employment will be taxed at 20%. If your main employment earnings are above the Personal Allowance but below the basic rate threshold, this code will ensure that you are taxed correctly throughout the year.

If you earn less than £12,570 across both of your employments, then a BR tax code will mean you are paying tax unnecessarily, so you should ask HMRC to split your Personal Allowance across both jobs – you’ll need to know what your earnings for the year will be.

In the event that both of your employments are very well paid, and make you subject to income tax at the higher or additional rate, your tax code will be D0 or D1 respectively, ensuring you are paying tax at the appropriate rate of either 40% or 45%. It would be advisable to check your tax code after the first pay day at your second employment, to ensure this code is applied by HMRC.

What about if I set up a Side Hustle?

As opposed to taking another job, many individuals now start their own part-time business to supplement their day job. If you are a self-employed individual, you’ll need to register for Self-Assessment with HMRC, unless your earnings are less that £1,000.

Self-Assessment is the system HMRC uses to collect tax from self-employed individuals. Each year you must complete and file a Self-Assessment tax return, listing your earnings and costs, along with your other income so that the Income Tax and NICs you owe can be calculated and paid directly to HMRC.

Our team of experts are experienced in dealing with such matters, and we offer a full Self-Assessment service covering any and all of your needs. If you have a query on any of the above or are thinking about setting up a Side Hustle and need some advice, get in touch with our team today!

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