How Income Tax Works in the UK
In the UK, income tax is calculated on an annual basis and applies to your total taxable income. Everyone is entitled to a tax-free Personal Allowance, which is set at £12,570 for the 2025/26 tax year. This means that you can earn up to this amount without paying income tax. Any income above this threshold is taxed according to three main bands:
- Basic Rate: 20% on income between £12,571 and £50,270
- Higher Rate: 40% on income between £50,271 and £125,140
- Additional Rate: 45% on income above £125,140
These bands apply cumulatively, meaning your income is taxed progressively as it moves into each band.
Do You Pay More Tax on a Second Job?
The short answer is no—second jobs aren’t taxed at a higher rate by default. However, because HMRC assesses your total income from all sources, additional earnings from a second job can push your total income into a higher tax bracket. For instance, if you earn £35,000 from your main job and £20,000 from a second job, your total annual income would be £55,000. This puts you into the higher-rate tax band, meaning some of your income will be taxed at 40%.
What Happens to Your Personal Allowance?
Typically, your Personal Allowance is applied to your main job—the one where you earn the most. If both jobs are ongoing and fairly consistent, you can request HMRC to split your allowance between the two. This involves assigning a portion of your allowance to each job to reduce the overall tax burden. However, most people choose to keep their full allowance on the higher-paying role, as it usually offers the most tax efficiency.
PAYE System Explained
The PAYE (Pay As You Earn) system is used by employers to automatically deduct tax and National Insurance from your salary. If you work two PAYE jobs, both employers will use PAYE to process your earnings. However, only one employer can apply your tax-free Personal Allowance. The other employer will typically apply a BR (Basic Rate) tax code, which deducts tax at 20% from all earnings.
If your total income increases and pushes you into a higher tax band, HMRC might assign a D0 or D1 tax code to your second job. These codes mean that income from that job is taxed at 40% or 45% respectively. It’s important to check your tax code regularly to ensure it reflects your current financial situation.
What Your Tax Code Tells You
Your tax code is a short series of letters and numbers that inform your employer how much tax-free income you’re entitled to. For example, the standard tax code for someone receiving the full Personal Allowance is 1257L. If your second job uses the BR code, you’ll be taxed at 20% on all income from that role. If it uses D0 or D1, your second job income will be taxed at 40% or 45%, respectively.
In Scotland and Wales, different codes such as SBR or CBR may be used. These reflect regional tax policies and should be reviewed just as carefully. If you believe your tax code is incorrect, you should contact HMRC to request a review.
National Insurance Contributions for Multiple Jobs
National Insurance Contributions (NICs) are separate from income tax and are also calculated on a job-by-job basis. If you have two PAYE jobs, you’ll pay Class 1 NICs separately on each salary. Class 1 NICs are charged at 12% on weekly earnings between £242 and £967, and 2% on anything above that.
Because NICs are not aggregated like income tax, it’s possible to overpay. If your combined earnings push you above the upper limit but are split between two jobs, you might pay more than necessary. In such cases, you can claim a refund from HMRC for the excess contributions.
Freelancing as a Second Job
Many people choose to freelance in their spare time, offering skills or services to clients outside their primary employment. In this case, you are considered self-employed and must report this income separately. Your freelance earnings are added to your total income for the year and are taxed according to the same bands.
To declare freelance income, you must register with HMRC for Self Assessment. You’ll receive a Unique Taxpayer Reference (UTR) number and will be required to file a tax return annually. Even if your freelance income is modest, it must be reported if it exceeds £1,000 in a tax year.
National Insurance for the Self-Employed
If you’re self-employed, you may be liable for Class 2 and Class 4 NICs. Class 2 is a flat rate, usually around £3.45 per week, while Class 4 NICs are based on your profits:
- 6% on profits between £12,570 and £50,270
- 2% on profits over £50,270
These contributions are calculated and paid through your Self Assessment return. They contribute to benefits such as the State Pension and are a legal requirement.
Keeping Records for Your Second Job
Good recordkeeping is essential when you have a second source of income. Whether you’re employed, self-employed, or both, accurate documentation will help you complete your tax return and defend against any HMRC queries. Essential records include:
- Payslips and P60s from all employers
- Invoices and receipts for freelance work
- Bank statements showing income and business-related expenses
- Mileage logs if you use your vehicle for freelance or business travel
Organising these documents early can save considerable time when it comes to filing your return.
Registering for Self Assessment
If you earn money outside of PAYE, such as from freelance or contracting work, you must register for Self Assessment. This process is done through the Government Gateway and should be completed as soon as you begin earning. Once registered, you’ll receive a UTR number, which you’ll use to log in and manage your account.
You must file your Self Assessment tax return online by 31 January each year, covering the income for the tax year that ended the previous 5 April. You’ll also need to pay any tax and National Insurance due by that date.
Employment Contract Restrictions on Freelancing
Before starting freelance work, check your employment contract. Some employers have restrictions on second jobs, particularly if they could be seen as competing with your main role. These clauses may forbid you from working with certain clients or from working during business hours. Violating your employment contract could lead to disciplinary action, so it’s wise to get approval from your employer if you’re unsure.
Communicating with HMRC
When you start a second job under PAYE, your new employer will ask you to complete a starter checklist. This information is sent to HMRC so they can assign the correct tax code. If you’re self-employed, you’ll need to register yourself and manage your own communications.
It’s important to keep HMRC updated about any changes in your income, employment status, or address. Failing to do so can result in incorrect tax codes and unpaid taxes.
If you know that a second job will push your income into a higher bracket, it’s wise to plan accordingly. Estimate your annual income from all sources and set aside enough to cover any additional tax. Some people choose to set up a separate savings account for their tax bill to ensure they’re prepared when payment is due.
Online tax calculators can help you estimate your total tax liability. Digital accounting software can also streamline this process, helping you track income, expenses, and due dates throughout the year.
Choosing the Right Time to Split Allowance
You can contact HMRC to split your Personal Allowance between two jobs, but it only makes sense if both jobs are consistent and long-term. Otherwise, you risk underpaying tax if one job ends unexpectedly. Most people apply the full allowance to their highest-paying role and use a BR code for the second.
If you do decide to split the allowance, HMRC will issue revised tax codes to each employer. Make sure to check your payslips afterward to confirm the changes have been implemented correctly.
Having a second job doesn’t automatically mean you’ll pay more tax per pound earned, but it can affect your overall tax rate depending on your total income. Understanding how your earnings are taxed and keeping detailed records will help you stay compliant and make the most of your additional income.
Self Employment as a Second Job
Freelancing or starting a business on the side is a common route for many people looking to earn extra income outside of their main employment. Whether you’re providing professional services, selling products online, or offering creative work, your income from this activity is treated as self-employment.
This means you’re responsible for managing and reporting your own tax obligations under the Self Assessment system. Knowing how to handle Self Assessment correctly is essential to avoid fines and ensure you’re paying the right amount of tax.
Understanding Self Assessment
Self Assessment is the method HMRC uses to collect Income Tax and National Insurance from individuals who do not have all of their income taxed at source through PAYE. If you freelance, run a business, or earn income that is not automatically taxed, you must report it through an annual tax return.
This system requires you to calculate how much tax and National Insurance you owe based on your income, expenses, and any other relevant financial activity. It can seem complex at first, but with the right tools and preparation, it becomes a manageable part of your financial responsibilities.
When Do You Need to Register for Self Assessment?
You need to register for Self Assessment if you earned more than £1,000 from self-employment in a single tax year. This threshold applies to your total trading income before expenses. Even if you earn below that limit, you might still want to register in order to claim certain tax reliefs or to keep your financial affairs organised.
Registration should be completed by 5 October following the end of the tax year in which you started earning self-employed income. For example, if you started freelancing in July 2025, you must register by 5 October 2026.
How to Register as Self-Employed
To register, you need to set up an account through HMRC’s online services. This process involves:
- Creating a Government Gateway account
- Providing your personal details and National Insurance number
- Describing the nature of your self-employment
Once registered, you’ll receive a Unique Taxpayer Reference (UTR) number by post. This number is used to identify you in all dealings with HMRC, including when you file your Self Assessment return.
Key Deadlines for Self Assessment
After registering, you’ll need to meet several important deadlines each year:
- 5 October: Deadline to register for Self Assessment
- 31 October: Deadline to submit paper tax returns (not common for most people)
- 31 January: Deadline to file online tax returns and pay any tax owed
Missing these deadlines can result in automatic penalties, which increase the longer your return or payment is delayed. Keeping a personal tax calendar or setting reminders can help you stay on track.
What You Need to Complete Your Tax Return
Filing your Self Assessment tax return requires you to have accurate and complete financial records. These include:
- Total income from self-employment (sales, commissions, etc.)
- Allowable business expenses
- Bank interest, dividends, or other income
- Any student loan or pension contributions
It’s also important to keep supporting documentation, such as invoices, receipts, and mileage logs, in case HMRC asks for proof of your entries.
Understanding Allowable Expenses
One of the advantages of being self-employed is the ability to deduct certain business-related expenses from your income. These allowable expenses reduce your taxable profit and therefore lower your tax bill. Common allowable expenses include:
- Office supplies and equipment
- Marketing and advertising costs
- Business travel and mileage
- Mobile phone bills (proportion used for business)
- Software subscriptions and tools
To be deductible, expenses must be wholly and exclusively for business use. You cannot claim personal costs, and where there is a mix of personal and business use, only the business portion can be claimed.
Calculating Profit and Tax Due
Your taxable profit is your total income from self-employment minus your allowable expenses. Once you’ve calculated your profit, you apply the standard tax rates to determine how much tax is due.
If you also have a full-time job under PAYE, the income from both sources is combined when HMRC assesses your total tax liability. This can push you into a higher tax band, meaning a larger proportion of your freelance income could be taxed at 40% or 45%.
National Insurance is also calculated on your profits. For the 2025/26 tax year:
- Class 2 NICs are £3.45 per week if profits exceed £6,725
- Class 4 NICs are 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270
These contributions are also submitted via your Self Assessment return.
How Payment Works
Tax and National Insurance owed from your Self Assessment return must be paid by 31 January following the end of the tax year. In some cases, you may also need to make a payment on account toward the next tax year.
Payments on account are advance payments based on your previous year’s bill. They are due in two instalments:
- 31 January (same day as your current year’s payment)
- 31 July
Each payment is typically 50% of your previous year’s tax bill. If your income drops or increases significantly, you can request to reduce or increase your payments accordingly.
How to File Online
Once your financial information is ready, you can log into your Government Gateway account to complete your return. The online system will guide you through each section, from entering your income to claiming expenses and calculating what you owe.
You’ll receive an instant estimate of your tax bill, and you can pay immediately or return to the system later to complete payment before the deadline. Make sure to save or print confirmation of your submission.
Using Software for Self Employment
Many freelancers use digital tax software to manage their income and expenses throughout the year. This software can:
- Track income and categorise expenses automatically
- Estimate your tax liability in real time
- Generate reports for tax filing
- Submit your return directly to HMRC
This can save you time and reduce the risk of errors, particularly if your freelance income is significant or complex.
Keeping Records for HMRC
HMRC requires you to keep financial records for at least five years after the submission deadline of each tax year. This includes:
- Sales invoices and receipts
- Bank statements
- VAT records if registered
- Expense logs and receipts
Keeping digital copies is acceptable and often preferable. Good recordkeeping not only makes tax filing easier but also protects you in the event of a tax investigation.
Combining PAYE and Self Employment
If you have both a salaried job and a self-employed income, HMRC will take both into account when assessing your tax. The tax you pay through your employer may not cover the total liability once your freelance income is considered.
Your Self Assessment return will combine both income streams to calculate the correct amount. You may not receive a separate bill for your freelance tax — instead, the online system will calculate your total liability and show any outstanding amount you need to pay.
How to Avoid Underpaying Tax
If you rely on your employer’s PAYE deductions to cover all your tax, it’s easy to underpay once freelance income is added. To avoid this, you can:
- Set aside a percentage of your freelance income each month
- Use tax calculation tools to estimate your annual bill
- Adjust your tax code to collect additional tax through PAYE if preferred
This proactive approach ensures you’re not caught off guard when the January deadline arrives.
Student Loans and Self Employment
If you have a student loan, repayments may be triggered based on your total income, including self-employed earnings. HMRC will calculate your repayment once your tax return is processed. Make sure to tick the relevant box on your return to avoid underpayment.
Repayment thresholds depend on which repayment plan you’re on, and repayments are calculated as a percentage of income over the threshold.
Dealing with Tax Code Adjustments
After filing your Self Assessment, HMRC may adjust your tax code to reflect your additional income. This ensures future PAYE deductions are more accurate. While this doesn’t replace the need for Self Assessment, it can reduce how much you need to pay at the end of the year. If your income changes significantly, you should notify HMRC to update your tax code.
This can prevent surprise tax bills and keep your payments aligned with your earnings.Effectively managing Self Assessment for your second job as a freelancer or sole trader involves understanding your obligations, keeping accurate records, and planning for payments.
Advanced Second Job Tax Situations
Working multiple jobs or juggling employment and self-employment introduces additional complexity to your tax obligations. Real-life income situations vary, and different combinations of jobs, freelance work, or varying income levels can affect how tax is calculated. We explored more intricate second income situations, including how changing jobs, short-term contracts, and varying income throughout the year can impact your tax liabilities. Understanding these complexities can help you avoid errors, reduce unexpected bills, and make informed financial decisions.
How Changing Jobs Mid-Year Affects Tax
When you change your main job partway through the tax year and take on a second one at the same time, it can disrupt your tax code and allowances. Each employer will report your income to HMRC, but it’s up to you to ensure that your personal allowance is correctly allocated.
If your previous employer used your full personal allowance and your new job also tries to apply it, HMRC may flag a duplicate, but it can still cause confusion or overpayments.
Make sure to:
- Notify HMRC of any employment changes
- Check your tax codes after starting a new job
- Use the P45 from your old job to help set up your new tax arrangement correctly
Short-Term or Seasonal Second Jobs
Taking on temporary or seasonal work, such as retail roles during holidays or agricultural work in peak seasons, can provide a financial boost. However, these short-term jobs are still subject to tax.
Because these roles are often treated as second jobs under PAYE, your employer is unlikely to apply your personal allowance. Instead, they may use a BR tax code, meaning 20% of your earnings will be taxed.
If you only earn a small amount during the short contract and your total income remains within your personal allowance, you can apply for a refund later through HMRC’s online services or via Self Assessment.
Working for Multiple Employers Simultaneously
If you’re employed by more than one company at the same time, the most important step is allocating your personal allowance. Typically, this goes to the higher-paying employer. Your second employer will apply a different tax code, often BR, unless instructed otherwise.
You’ll need to:
- Provide each employer with your correct details via a starter checklist
- Check your tax codes periodically
- Review your P60s at year-end to ensure accuracy
If your total earnings push you into a higher tax bracket, the additional tax will either be deducted automatically through your second job or reconciled at the end of the tax year.
Receiving Multiple Types of Income
Some people receive a mix of PAYE earnings, self-employment income, dividends, rental income, or pensions. Each type of income is treated slightly differently for tax purposes, but your overall tax liability is based on the total amount.
Income such as:
- PAYE wages are taxed at source
- Freelance/self-employed earnings require Self Assessment
- Rental income must be reported and may be offset with property-related expenses
- Dividends are taxed at different rates, starting with a £1,000 allowance
Tracking and reporting all these income streams accurately is essential. HMRC’s digital services allow you to manage these within a single Self Assessment return.
Income That Pushes You Into a New Tax Band
One of the most significant effects of having a second income is that your total earnings may move you into a higher tax bracket. Even if the income from your second job is relatively small, it could cause some or all of your earnings to be taxed at the higher (40%) or additional (45%) rate.
For example:
- Main job: £48,000
- Second job: £10,000
- Total income: £58,000
In this case, £7,730 of the second income is taxed at 40%, while the rest is taxed at 20%. Understanding this progression helps you budget and avoid being caught off guard when your tax bill is due.
Self Assessment for Irregular Income
Freelancers or contractors may experience fluctuating monthly earnings. HMRC assesses self-employed income based on the total annual profit, so occasional spikes in income won’t push you into a higher bracket unless your year-end total passes a threshold.
To manage this:
- Monitor your cumulative profits throughout the year
- Use accounting tools to project year-end totals
- Set aside money regularly to cover income tax and National Insurance
Planning ahead is particularly crucial if you also earn a steady salary, as the combination of predictable and unpredictable income makes it harder to estimate liability without regular checks.
How Tax Codes Are Adjusted for Second Jobs
Your tax code determines how much tax your employer deducts. If HMRC is aware of multiple income streams, they may issue an adjusted tax code mid-year. This could happen automatically if your employer files regular updates, or you may need to contact HMRC directly.
Common second job tax codes include:
- BR: Basic Rate, used when no personal allowance is applied
- D0: Income taxed at higher rate (40%)
- D1: Income taxed at additional rate (45%)
In Scotland, equivalents like SBR, SD0, and SD1 are used. You can view and manage your tax code via your personal tax account online. It’s advisable to check this after any major employment change or if your second job increases significantly.
Requesting a Refund for Overpaid Tax
It’s common for people with second jobs or temporary contracts to overpay tax, especially if personal allowances aren’t applied correctly. If you believe you’ve overpaid, you can request a refund from HMRC after the tax year ends.
To do this:
- Wait until you receive all P60s and P45s
- Use the online tax refund tool on the HMRC website
- Alternatively, file a Self Assessment if required, which will calculate any overpaid tax automatically
Refunds are usually processed within a few weeks, but having accurate records speeds up the process.
Adjusting Your Personal Allowance
In some circumstances, it may be beneficial to split your personal allowance between two employers. This is more common when both jobs are consistent and offer similar levels of income. You can request this adjustment by contacting HMRC and providing your job details.
Once approved, HMRC will issue new tax codes to both employers. However, be cautious: if one job ends unexpectedly or you begin earning significantly more from one role, you could underpay tax without realizing it.
Using Tax Estimators and Budgeting Tools
Online tax calculators are useful for estimating your tax liability based on current income. Many tools allow you to input income from multiple sources and forecast tax owed, including:
- PAYE earnings
- Self-employed profits
- Dividend and savings income
Some advanced budgeting tools also let you allocate a percentage of your income into savings accounts earmarked for taxes. This makes it easier to meet payment deadlines and avoid using money intended for other expenses.
National Insurance Contributions Across Multiple Roles
If you’re working more than one PAYE job, each employer will deduct Class 1 NICs. These deductions are not combined when taken, but HMRC reviews your annual income at the end of the tax year.
If your combined earnings exceed the upper earnings limit and you’ve overpaid NICs, you can claim a refund. Alternatively, if you are both employed and self-employed, you may owe Class 2 and Class 4 NICs on your freelance profits in addition to Class 1 contributions on your salary.
To manage this:
- Keep detailed records of total earnings from all jobs
- Use the Self Assessment process to reconcile any over- or under-payments
- Review NICs annually using HMRC’s records
VAT Considerations for Side Businesses
If your freelance or business income exceeds the VAT registration threshold (currently £90,000 per year), you’ll need to register for VAT and begin charging it on applicable sales. This is more relevant for high-earning freelancers, but it’s important to monitor turnover if you’re growing quickly.
Once registered, you’ll submit quarterly VAT returns and can reclaim VAT on business expenses. However, VAT introduces more recordkeeping responsibilities and changes how you price your services.
Claiming Work-Related Expenses in a Second Job
If your second job involves out-of-pocket expenses—such as travel between sites, equipment, or home office costs—you may be able to claim tax relief.
For PAYE employees:
- Use HMRC’s online service to claim flat-rate or actual expenses
- Submit claims for uniform, mileage, or professional subscriptions
For self-employed roles:
- Claim expenses directly through Self Assessment
- Ensure expenses are wholly and exclusively for business purposes
Recording expenses as they occur reduces the chance of missing deductions and lowers your overall tax liability.
Common Pitfalls When Managing Tax on a Second Job
Many taxpayers face challenges when navigating tax on multiple incomes. Common mistakes include:
- Assuming second jobs are taxed at a different rate
- Failing to inform HMRC of freelance income
- Relying solely on employers to handle tax without reviewing codes
- Forgetting to set aside money for Self Assessment payments
- Claiming personal expenses as business deductions incorrectly
Avoiding these pitfalls requires attention to detail and proactive communication with HMRC. Keeping a spreadsheet or using accounting software helps maintain clarity across income sources.
Planning for Future Tax Years
As your second income evolves, whether through growth, reduction, or new income streams, revisit your tax setup annually. Check:
- Whether you need to update your tax codes
- If your income now requires VAT registration
- Whether to adjust your payments on account for Self Assessment
Reviewing these elements each year ensures your tax strategy remains efficient and compliant.
Conclusion
Taking on a second job—whether as an employee, freelancer, contractor, or small business owner—can be a smart way to supplement your income, build new skills, or explore a passion project. However, it also introduces additional layers of tax responsibility that require careful attention.
Across this series, we’ve explored how second jobs are taxed under the same basic rules as your main employment. Your overall tax bill depends not on the job itself, but on your total annual income. If your combined earnings exceed the basic threshold, your additional income becomes subject to higher tax rates. This is a critical concept to understand: a second job doesn’t inherently incur higher taxes, but it can elevate you into a new tax band.
For those who freelance or run their own business on the side, the Self Assessment system becomes essential. It requires you to register with HMRC, track your earnings and expenses, and file a return by 31 January each year. National Insurance also applies, often in more than one class depending on how you earn. If you’re both employed and self-employed, you’ll need to reconcile contributions across different roles.
We’ve also examined more complex scenarios—short-term contracts, changing jobs mid-year, earning different types of income, and managing fluctuating earnings. In each case, the key takeaway is to maintain accurate records and understand how your income layers together to affect your tax obligations. From proper tax code allocation to claiming allowable expenses and using estimation tools, proactive financial planning helps you stay ahead.
Modern digital tax tools and online resources make it easier than ever to handle second-job taxes. These solutions allow you to log income in real time, file documents electronically, calculate estimates, and avoid last-minute surprises. They’re particularly valuable when you’re juggling multiple streams of income and varying work arrangements.
Ultimately, the goal is not just compliance, but financial confidence. Knowing how much tax to pay, when to pay it, and how to reduce your liability through legal allowances gives you control over your finances. Whether you’re earning a few hundred pounds extra each month or building a substantial second income, the principles stay the same: stay informed, stay organised, and take action early.
For further guidance, consult HMRC’s official help pages or seek personalised advice from a qualified tax advisor. With the right knowledge and systems in place, managing tax on a second job can be straightforward—and even empowering.