How Does Tax Work With 2 Jobs UK

Tax on a second job may seem complicated at first, but it doesn’t need to be. A second job is a reality for many, but you may need to pay tax on the combined income of both jobs when they exceed your tax free personal allowance (£12,570 in the 2024/25 tax year). The PAYE system often makes this relatively straightforward, but one or both of your jobs may be self employed, in which case you’ll need to complete a self assessment tax return and get to grips with the tax you owe.

So, how does tax work with two jobs? And how do you make sure you are paying the correct amount and not too little or too much tax?

In this article, we will explain everything you need to know about being taxed with two jobs. We will also give some examples of different scenarios to show how tax is affected as well as discuss other financial matters such as national insurance contributions and pension payments.

How Are You Taxed If You Have More Than One Job?

Assuming you are currently employed by an employer, you should already have been included in their PAYE system “Pay As You Earn”. This means that your employers are now accountable for deducting the proper portion of income tax directly from your salary, including your National Insurance (NI) contributions as well as national pension contributions and private contributions if you are enrolled in a workplace pension scheme.

If you have more than one employer, each employer will need to add you to their individual PAYE system. You are required to complete the new starter checklist accurately and then provide the necessary documentation to your employers, stating that you currently have another job. Once you have done this, the employer will be able to establish the appropriate tax code for you. Your tax code is essential to making sure you are not paying too much or too little tax from your salary. Understanding tax codes is vital when you have two jobs.

Picking A Primary Employer

You’ll need to pick a primary employer (and therefore primary income). Generally, this will be the employer from which you receive the most salary. It is more sensible for your primary employer to account for your personal allowance through your tax code. Each individual is granted an annual personal allowance of £12,570 untaxable income. Essentially the first £12,570 you earn is tax free pay, which is why you’ll want this to apply to the job that pays you the most as it will ultimately affect how much tax you pay.

Keeping Employers Informed

If you neglect to inform your second employer that you are already employed, they might incorrectly apply the standard tax code which specifies to HMRC that you are eligible to receive your full personal allowance. In doing so, you will receive double the full tax free allowance amount and you will end up underpaying tax. This will cause headaches later down the line, HMRC will spot the mistake, and you’ll need to pay back all the tax you should have owed from the start.

Dividing Personal Allowance Between Jobs

Should you earn under £12,570 for both jobs, ask HMRC to divide your personal allowance between two different employers. This ensures you will receive your full personal allowance and makes sure you don’t pay any tax. You will still need to pay national insurance, student loan repayments, and your other responsibilities, however.

Examples Of How You Are Taxed When You Have Two Jobs

1. Your first job pays £16,000 per year and your second job pays £6,000 per year. The entirety of your personal allowance is claimed from your first job because it pays you more and above the personal allowance amount. The total earnings from the second job will be taxed at the basic rate of 20% considering your total earnings are under £50,271.
2. In a scenario in which you work two jobs where the first job pays £10,000 and the second job pays £2,000, the earnings from both come to a total that is under your personal allowance, therefore none of your earnings are subject to income tax.
3. If you work 2 jobs that both pay the same, for example, £10,000 and £10,000. Both of these salaries are below your personal allowance, therefore it is possible to ask HMRC to split this across both jobs. It is recommended to select the most reliable job as your primary employment. 100% of the earnings from your primary employment are tax-free because it is covered by your personal allowance. The remaining balance can be assigned to your second job. The residual earnings from the second job are taxed at the basic rate of 20%.

Will Tax Be Higher For A Second Job?

It is common for people to incorrectly assume they will be taxed more when they have more than one job. In the sense that the more you earn, the more taxes you pay, this is true. However, the total income will not be taxed any differently, regardless of how many jobs you work. It is possible that your total income from more than one job could move you into a higher rate income tax band.

UK Tax Bands

As it stands in the UK for income tax bands for the 2024/25 tax year you’ll be taxed according to the following:

Scotland Tax Bands

In Scotland rates are slightly different and income tax bands look like this:

How Will I Be Taxed If I Have Two Jobs And Reach A Higher Tax Band?

Let’s assume you have 2 jobs. The first job pays £45,000 and the second pays £10,000. As we discussed before, your entire personal allowance shall be claimed through your first job. You will be taxed basic rate tax on the remainder of your earnings (£32,430) from this job. And you’ll have a standard tax code for both jobs here.

Since your full personal allowance has been accounted for from the first job, 100% of the earnings from your second job are subject to income tax. £5,270 from the second job shall be taxed at the basic rate as this totals your earnings to £50,270. The £4,730 surplus you receive from the second job will be taxed at 40% because this income now moves you into a higher rate tax band.

If you earned £55,000 from one job, the tax calculation would be the same, meaning you are not taxed more or less if you have multiple jobs. Keep in mind that if you have more than one job, it is possible to see other deductions from your salary like NI contributions or workplace pension contributions.

How Do National Insurance Contributions Work With Two Jobs?

There are additional deductions from your salary in addition to income tax, including NI contributions. Simply put, NI contributions are a tax which pays for state benefits. NI is calculated in a different way from your personal allowance.

Everyone over the age of 16 and earning at least £242 per week must pay NI on every job. This threshold applies to each job and does not generally take into account your total earnings across multiple employments, meaning it is quite easy to underpay or overpay on NI if you aren’t aware of the national insurance contributions you ought to be making.

National Insurance Rates 2024/25

Example Of Overpaying NI If You Have Multiple Jobs

£600 per week comes from your first job and £500 per week from the second. Earnings from both are above the Primary Threshold but remain below the Upper Earnings Limit (UEL), meaning 100% of the earnings from both jobs are liable to 8% NI (as a category A employee). If £1,100 per week was earned under one job, you would fall into the UEL. In this case, your earnings of up to £242 would be subject to 0% NI, from £243-£962 subject to 8% NI, and the remaining £963-£1,100 subject to reduced 2% NI rate.

To avoid overpaying NI, it is possible to inform HMRC and ask to defer your NI if you know in advance that you will go into the UEL across two jobs. Also, if you are already in a scenario where you have overpaid, you can complete a form requesting a refund. The refund process will take around two weeks with the money being paid straight into the same bank account that your salary is paid.

Workplace Pension: How Does It Work When You Have Multiple Jobs?

Employers are legally obligated to automatically enrol all eligible jobholders onto a workplace pension scheme. You are deemed to be an eligible jobholder when:

• Aged between 22 and the state pension age
• Earning above the earnings threshold (£10,000 for the tax year 2024/25 but is calculated on a pro-rated basis contingent on your pay period)
• Working primarily in the UK (you should be based in the UK but overseas travel for work is acceptable)
• Having a contract of employment (not a freelancer or contractor)

For all workplace pension schemes, it is necessary to make a minimum contribution of 5% of your earnings and the contribution cannot be divided across two different jobs. Also, if you have multiple jobs, you can opt out of any workplace pension schemes, remain on one, or remain on all if you choose.

The maximum amount of pension contribution you can make without losing any tax relief is currently set at 100% of income with a ceiling of £40,000. However, there is not a maximum number of separate workplace pension schemes you can be on. Although it is not always easy, the more you contribute to your pension schemes throughout your career, the better off you will be later in life when the time comes to collect, so it’s worth considering if you want to pay into multiple pension pots across both your jobs.

How Does Tax Work With 2 Jobs UK Summary

Working multiple jobs is difficult enough without worrying about your taxes. Hopefully, this article will reassure you that you will not get taxed more on a second job. Tax works to the total value regardless of how many jobs are worked to get to that total. If you have any worries regarding your tax code or concerns about paying the proper amount of taxes, do not hesitate to contact your HR or Payroll department who should be able to check everything is correct.