Introduction
If you are working more than one job in the UK, it’s crucial to understand how your income from a second job is taxed. The tax system can be complex, and it’s crucial to get it right to avoid any unexpected bills from HM Revenue and Customs (HMRC).
How Much Tax Do You Pay on a Second Job?
The tax you pay on your second job depends on the amount you’re earning and your personal circumstances. In the UK, everyone is entitled to a certain amount of income free of tax each year, known as the Personal Allowance. For the tax year 2021/22, the Personal Allowance is £12,570.
If the income from both your jobs is less than your Personal Allowance, you won’t have to pay any tax. However, if your income from both jobs exceeds the Personal Allowance, you will be liable for income tax.
The basic rate of income tax in the UK is 20%, which applies to income up to £50,270. Any income between £50,271 and £150,000 is taxed at the higher rate of 40%. Any income over £150,000 is taxed at the additional rate of 45%.
How Is Tax Collected?
Your tax is usually collected through the Pay As You Earn (PAYE) system. This means your employer deducts tax from your wages before they pay you. If you have two jobs, both employers will use this system. However, your Personal Allowance will usually be applied to the job you earn the most from.
What If I’m Self-Employed?
If you’re self-employed and also have a job where you’re an employee, the tax situation can be a bit more complex. You’ll need to complete a Self Assessment tax return each year to declare your income from self-employment. HMRC will then calculate how much tax you owe.
Tips for Managing Tax on a Second Job
- Keep Good Records: It’s crucial to keep accurate records of your income and expenses from all your jobs. This will make it easier when it comes to filling in your tax return.
- Understand Your Tax Code: Your tax code tells your employer how much tax to deduct from your wages. Make sure you understand what your tax code means and check that it’s correct.
- Ask for Help: If you’re not sure about anything, don’t be afraid to ask for help. You can contact HMRC directly, or consider getting advice from a tax professional.
Conclusion
Working a second job can be a great way to boost your income, but it’s important to understand how it will impact your tax situation. By keeping good records, understanding your tax code, and seeking professional advice if needed, you can make sure you’re paying the right amount of tax.
