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How much tax do you pay on a second job? - The PAYE People

October 5, 2021by The PAYE People

We all have to pay taxes. This is also the case while working two jobs. The amount you pay in taxes depends both on the type of job that you have and how much you are earning. It might look like you are paying more taxes if you have two jobs but that only means that you are earning is more. Here’s all you need to know on how much tax do you pay on a second job.

How do you go about paying taxes if you have two jobs?

Integrating two jobs into your life can make paying your taxes more complicated especially if you are doing the payments by yourself. That would mean a lot of bookkeeping and knowledge of how the tax system works. You will have to fill out separate tax forms at the end of the year to declare how much you’ve earned from each job. This can be time-consuming and even frustrating if you are not sure what you are doing.

Fortunately, all this can be done at the source of your income. The employer helps their employees to file for their tax returns through their PAYE system. But before this happens, you need to provide accurate information to get the right tax code for your situation. Ensuring your tax is in the correct bracket may not be the most interesting thing in the world, but it’s important. It can make a big difference to your finances.

You need to make sure your tax code is in the correct bracket so you don’t overpay or underpay your taxes. You can do this by liaising with your employer for advice. The amount you owe in tax may depend on factors like your age, married status, or whether or not you have a disability, among other issues.

If you determine that you have two employers, then one of them has to be your primary employer. Ideally, the one where you are spending most of your time or making the most money. That means you will need to file taxes with that employer first. Here are examples of how your situation can pan out.

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Examples: Taxation on two jobs earning less than £50,000

First premise:

You are working two jobs where your first job earns more than £12500 (personal allowance) while the second job brings in less than the personal allowance. Meaning that both jobs don’t go beyond £50,000. You can claim your personal allowance from the initial payment that’s more than £12500. The earnings from your second job become subject to income tax which will be at the rate of 20% considering your earnings are not £50000 or more.

Second premise:

You have two jobs where one earns more than the other but both of them don’t sum up to £12500 (personal allowance). In this case, you won’t need to pay taxes. None of your income should be subject to income tax.

Third premise:

You have two jobs both under £12500 (personal allowance) but their total goes beyond the personal allowance. In this case, you can talk to the HMRC to split this money between the two payments. This means that the HMRC will take part of the money of your second job and add it to the primary employment until it’s £12500. This then becomes your personal allowance and won’t be subject to income tax. The remaining amount from the second payment is what is taxed. That will be 20% of the second salary remainder because the earnings are not £50000 or more.

Do you pay more taxes on the second job?

It depends on your overall income when calculating your taxes. In the UK, the HMRC divides up your total income by sources in order to figure out how much tax you owe. Income from a second job will be counted as a potential taxable income, but only if your income from that job meets a certain threshold. If you are struggling to determine how much you should pay as tax, you’ll have to talk to a specialist in order to know how much tax is owed.

But the truth is that your multi-job income can push you to a higher rate tax bracket. However, if you do decide to continue earning multiple incomes, it’s important to know what you’re getting yourself into and to be sure you’re prepared for a potential higher rate tax bracket.

There are a lot of misconceptions around what the tax bracket is. Most people have a misunderstanding of what the tax bracket is, not knowing it is a marginal tax rate, so it changes depending on your income. And it applies to all of your earnings, not just a certain amount.

Most of us will hit the basic rate which will be 20% if we earn under £50000 – but if our earnings are over this figure, we will be taxed at the higher 40% rate. If you earn more than £150,000 you will be taxed at 45%. It’s also worth noting that if you earn more than £100,000 you lose personal allowance (£1) for every £2 you earn over this amount. That means that by the time your earnings reach £125,000 you’ll have nothing in the personal allowance.

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More examples: Taxation on two jobs where you earn £50,000 or more

Fourth premise:

You have two jobs and the primary one pays £45,000 and the other pays less than £12500 (personal allowance). You will claim the whole personal allowance through the first job. Then a basic rate of 20% will apply to the total amount of money you are left with.

If your personal allowance is already accounted for and your total earnings are still above £50,000, part of the second earnings (which adds to the primary income to make it £50,000) will be subject to the basic income tax rates while the remaining will be taxed at 40% because that income will be in the higher category of income tax band.

The same applies if you are earning more than £50,000 for a single job. This means that you do not pay more just because you are doing two jobs. But take note that if you are doing two jobs, you might get deductions from your salary for other reasons like workplace pension contributions. These are not related to tax obligations.

What happens to taxes when I get a second job during furlough?

Many people in the UK are making less pay, and they don’t know when the federal shutdown will end. The uncertainty has made it hard for people to make their budget. Recently, many people have taken on second jobs while they still earn 80% of their salaries from their primary jobs. The government treats this as a second job and will tax it accordingly. Your employer will provide you with a P46 form that you’ll be required to fill when you start the second job.

How should you handle taxation on a zero-hour contract and taking a second job?

A common concern for people with a zero-hour contract is how much tax they need to pay when they are at their other job. If you are an employee for another employer, the taxes are being deducted before your wages are paid, so you don’t have to take any action aside from informing HMRC.

If you are sure your zero-hour contract won’t be fetching in income any time soon, inform the HMRC to review your tax code. This can result in swapping the tax codes so that your primary employment becomes the second one and vice versa. Alternatively, you may want to split your personal allowance across your two employments.

A woman working on a laptop during her second job.

A summary of how much tax do you pay on a second job

We hope this has helped you to fully understand how much tax you will pay on a second job. But we appreciate that this can be a tough call for some people and you might need help from someone who understands these things. We suggest consulting with a professional to get the best advice on what to do with filing taxes. 

Reach out to the experts at The PAYE People

If you are working your second job, you perhaps have a uniform that you have to wear. You may be eligible to claim a tax return for up to four years. The same applies to your travel expenses too if you are constantly travelling to work or perhaps need accommodation for your role. 

The easiest way to get back all the tax your owed is to get in touch with our expert team here at The PAYE People. With an in-depth knowledge of HMRC’s rules, we can give you a clear sense of exactly what you’re eligible to claim. Not only that, but we can take over the claims process for you. We’ll help you gather the necessary evidence, fill out all the forms properly.

We offer free consultations, so if you think you may be owed a tax rebate, get in touch today. We can discuss the specifics of your situation and help you understand if you’re owed money. If we think you are, we can take over the claim on a no-win, no-fee basis. If you don’t get a refund from HMRC, you won’t owe us a penny. Get in touch with us today to start your claim or drop us an email and one of our experts will get back to you.

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