Balancing a full-time job with self-employment can be an excellent way to boost your income or trial a new business venture, but it also comes with additional tax responsibilities.
Navigating taxes when you have two jobs – one as an employee and the other as a self-employed individual – can feel confusing. This blog covers the essential information to manage your tax obligations in both roles.
Can I Be Employed and Self-Employed at the Same Time?
Yes, you can be employed and self-employed at the same time. This could be by working a full-time or part-time job while running your own business or freelancing on the side.
How Does Tax Work If You Have Two Jobs?
When you have both employment income and self-employment income, your taxes will be handled in two ways:
- Your employer automatically deducts taxes on your income through PAYE. This covers your Income Tax and National Insurance contributions based on your earnings.
- For your self-employed income, you’re responsible for completing a Self-Assessment tax return by the end of January each year. You’ll need to calculate your profits (income minus allowable expenses) and pay Income Tax and National Insurance based on these earnings. Your employment income and tax paid will also need to be declared.
Your tax amount will depend on your total income from both sources. If your combined income pushes you into a higher tax bracket, you may end up paying more tax overall. It’s important to keep accurate records of your self-employed earnings and expenses to ensure your tax return is correct and you don’t pay more tax than necessary.
Do You Pay Tax If You Have Two Jobs?
Yes, you will pay tax on both jobs. Whether you’re employed and self-employed or have two employed roles, each source of income will be taxed based on your total earnings for the tax year.
The tax you pay depends on your personal allowance, which is the income you can earn before paying tax. The standard personal allowance for the 2024/25 tax year is £12,570. If your income from both jobs exceeds this threshold, you’ll pay Income Tax on the portion above your allowance.
For example, if you earn £20,000 from your employed job and £10,000 from self-employment, your total income is £30,000. You will need to pay tax on everything above £12,570 – this comes to £17,430 which will place you in the basic tax rate of 20%.
Do I Need to Tell HMRC If I Get a Second Job?
Yes. If you take on a second job, especially if it involves self-employment, you must tell HMRC. When you start self-employment, you’ll need to register with HMRC to file a Self-Assessment tax return.
This is essential because self-employed income isn’t taxed through PAYE like your employment income – and HMRC needs to know about your earnings to calculate the correct amount of tax. Alternatively, 360 Accountants will help guide you through the process every step of the way.
To register as self-employed, visit the HMRC website and provide the necessary details. Once registered, you’ll be required to submit a Self-Assessment tax return every year by the 31st of January deadline.
If your second job is another employed role, your employer will handle taxes through PAYE, but it’s still important to make sure HMRC is aware of your new job to ensure your tax code is correct. Incorrect tax codes could result in underpaying or overpaying tax.
Tips For Managing Your Tax Efficiently
Managing your taxes when you have both employed and self-employed income can feel challenging, but staying organised will really help. Here are some tips:
- Track your self-employment income and expenses: Keeping accurate records throughout the year will make completing your Self-Assessment much easier and help you claim all allowable expenses.
- Save for tax payments: Unlike PAYE income where tax is deducted automatically, self-employed income isn’t taxed until you file your Self-Assessment. Setting aside money for your tax bill is a great way to prepare for your tax bill.
- Prepare and submit your tax return as soon after 5 April as possible: This will give you plenty of time to save up for any payments that are due the following 31 January (and sometimes 31 July).
- Seek professional advice: If you’re unsure about handling taxes with multiple income streams, working with an accountant can help you stay compliant and make the most of your tax reliefs.
Conclusion
Having a job and a self-employed side gig can offer great financial flexibility, but managing your tax obligations effectively is crucial. Understanding how second job tax works and informing HMRC of your situation are key steps to ensuring you pay the right amount of tax on all your earnings. If you need help navigating these tax rules or need help with your Year End Accounts, 360 Accountants can assist you with expert guidance tailored to your situation.
We also offer our clients tax enquiry protection which pays our fees should your tax affairs be selected for scrutiny by HMRC – please contact us for a quote.