Second job tax and pay
Getting a second job can be a good way of making ends meet – but there might be tax on a second job you have to pay and National Insurance and benefit implications from earning separate salaries.
Checking the basics on a second job
- Make sure you’re getting at least the National Minimum Wage for each job. Most workers over school-leaving age are entitled to the National Minimum Wage and all employers have to pay it.
- Understand your employment rights. Nearly all workers have certain legal rights at work. You and your employer can agree to any terms you want, but you can’t agree to any terms giving you less than the rights you have under law. So, for example, you can’t agree to be paid less than the minimum wage.
Your working hours across multiple jobs
By law, most workers can’t be compelled to work more than an average of 48 hours per week. If you’re over 18, you can opt out of this, and might need to do so if you want to take on a second job.
To do it, you might need to give your employer a signed opt-out agreement. The limit on hours does not include any work you do as a self-employed person.
Does your contract allow you to take a second job?
One of the first questions you need to ask yourself, is if your existing contract of employment lets you take on a second job. You should have been provided with a copy of your contract when you started working for your employer and your HR department should be able to provide you with one.
Your employer might rule out additional jobs in situations where:
- There might be a conflict of interest. For example, working for a rival company.
- Your second job might bring your employer into disrepute.
If there’s nothing in the contract, your employer can’t prevent you from taking another job.
Your tax situation if you have a second job
If you’re working more than one job, it’s important to make sure you’re paying the right amount of tax. Errors can happen because of glitches in the PAYE (Pay As You Earn) process or because there’s confusion around your personal circumstances.
The tax system treats one job as your main employment and will apply your personal allowance (the amount of income you can get each year without paying tax) to that job.
Make sure you’re paying the right amount of tax
You could end up not paying enough tax if you have a second job and:
- HM Revenue & Customs (HMRC) doesn’t know you have two jobs and is applying your personal allowance to both.
- What you earn from both your jobs makes you a higher-rate tax payer, but tax is deducted from your second job at the basic rate.
This could result in you getting hit with a big tax bill and being charged interest and penalties.
You could end up paying too much tax if:
- The income from both your jobs adds up to less than your personal allowance.
If this is the case, you can ask HMRC to divide your allowance between your jobs, or ask for a refund at the end of the tax year.
You’ll need to send copies of P60s from your jobs to do this.
To avoid over or underpaying:
- Make sure HMRC knows you have more than one job. When you start your second job, complete HMRC’s new starter checklist from your new employer This will help HMRC allocate the right tax code.
- Check your tax codes for both your jobs to make sure they are correct. If you have more than one job, you’ll have more than one tax code.
National Insurance and second jobs
The “Earnings Threshold” for starting to pay National Insurance is £157 per week (2017-18) and there’s a limit for each job. If you earn less than that from one of your jobs, you won’t have to pay National Insurance on that job.
Colin has two jobs. The weekly National Insurance ‘Earnings Threshold’ for employees is currently £157 per week.
In his main job Colin earns £175 per week and in his second job earns £50 per week. In the first job Colin will pay £2.16 per week in National Insurance (12% on £175 – £157). In the second job he will pay no National Insurance as his earnings for that job are less than £157 in the week.
There are also (complicated) rules limiting the overall amount National Insurance you must pay if you have more than one job or mix employment and self-employment, but these are unlikely to be relevant unless you’re quite highly paid.
Tax credits and benefits
Taking a second job can affect your tax credits or benefits, so you need to work out exactly how much you’d gain from it before you start.
Second jobs and pensions
Taking a second job might give you the opportunity to pay into another workplace pension scheme, but remember to keep track of any small pensions you’ve paid into.
If you pay a small amount into a pension in your second job, it might be worth amalgamating it with a larger pension when you leave.
If you are already receiving your State Pension, or you have a private or occupational pension, and you work as well, it can have tax implications.
Again, it’s very important to make sure you’re paying the correct amount of tax and have the right tax code.
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