Whilst having a second job is a great way to earn some extra income, it’s important that you’re aware of the tax implications. In the UK, you’re taxed on the total amount of your income earned from all sources. So, if your total income from all your jobs exceeds your personal allowance, you’ll be paying tax on your second job income as well as your principal income.
The amount of income tax you have to pay depends on which tax band your total income falls into. Currently, an individual’s personal allowance – the money you can earn before you have to start paying tax – is £12,570 for the 20232/24 tax year. You will pay tax on all your earnings above this allowance threshold at the following rates:
- 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 earnings above £150,000.
Source: https://www.gov.uk/income-tax-rates
You may have to pay National Insurance (NI) contributions on your second job earnings, which is currently at a rate of 13.8%. If you’re self-employed, don’t forget it’s your responsibility to ensure you pay your NI contributions to HMRC. The Class 4 NI rate for the self-employed is 9% on profits between £12,570 and £50,270 and 2% on profits over £50,270.
However, for a second job, make sure you’re paying the right amount of income tax and NI contributions as they may be different from the rates you pay on your primary job income. HMRC’s website has all the relevant details about the tax implications regarding second job earnings.
Here are our tips to think about regarding the tax implications of a second job:
- You may be able to claim tax relief on expenses you incur while carrying out your second job. For example, if you use your car for work purposes you may be able to claim a mileage allowance.
- If you’re self-employed, you may be eligible to claim tax relief on some business expenses, such as a deduction on the cost of materials, equipment or uniforms.
- Be prepared to complete a self-assessment tax return – an HMRC form for declaring your income and expenses.
By following this advice and handy tips, you can make sure you’re paying the right level of income tax and NI contributions on your earnings from your second job and protect your pennies as much as possible.
