Not sure how taking on a second job affects your tax bill?
If you’re working more than one job you need to make sure you don’t end up paying too much – or too little – tax. Neither are good for you and your wallet.
We spoke to The Money Advice Service to find out more about tax on second jobs works:
Are you allowed to take a second job?
First thing’s first: you need to work out if a second job is viable option.
Start by making sure your current contract doesn’t prevent you taking on more work. It could be seen as a conflict of interests, for example.
If there is anything in there that might prevent you taking on the extra job, talk to your main employer. But if there’s nothing in the contract, you’re good to go.
The basics
Before you take on a second job, make sure that:
- You’re being paid at least minimum wage for each job
- You understand the terms of both contracts
- You understand the impact of taking on both roles
What is minimum wage in the UK?
What is the National Living Wage?
Contract of employment – key terms explained
How HMRC works out tax
The tax system sees one job as your main income, and this is where you get your £11,850 personal allowance – the amount you earn before you pay any tax.
Your second income will be added on top, so there won’t be a personal allowance. Though it looks like you get taxed more on this money, if you added that income to your earnings at your other job you’d pay exactly the same amount of tax overall.
How much tax to pay for a second job
This will depend on how much you’re paid for each position.
However, if your first position falls below your personal allowance, your second job tax will generally be set at the standard 20%.
For example:
If you are paid £150 per week in your first job, and £100 per week in your second job.
No tax will be paid on the first position (as it is under your personal allowance), but the second job will be taxed at 20%.
What does a BR tax code mean?
The tax on a second job is often paid through a BR tax code.
BR stands for Basic Rate, which is set at 20%.
However, it is possible that your extra income could push your total earnings for a year into a higher tax bracket (if earning over £46,351) – meaning you may have to pay more tax.
Examples of when you could be paying too little tax:
- You haven’t told HMRC you have a second job and you’re given a second personal allowance
- Your second job pushes you into a higher-rate tax band, but you are paying basic on both
Example of when you could be paying too much tax:
- The combined salary from your two jobs is less than your personal allowance.
How to avoid under or overpaying your tax
When you start your new job, make sure you get a Starter form (previously called a P46) from your new employer. This form lets you detail your other employment and it’ll be sent to HMRC.
You should also check your tax codes. The second job will probably have the code BR or D0 after a number.
Paying too much tax: What to do next
Second jobs and pensions
If you have the opportunity to pay into a pension in your second job, just remember to keep hold of the details.
If you’re earning less in the second job – and therefore paying less into this pension – it could be a small amount and easy to forget. You can always combine it with other pension pots when you leave the second job.
Workplace pension laws: What you need to know
Taking on a second job? View all available part-time jobs now.
