Second Job Tax – Everything You Need To Know!

If you hold multiple jobs, it’s essential to understand the tax implications of your second job. This knowledge can help you avoid overpaying or underpaying taxes, which could lead to complications down the line. Overpaying taxes isn’t beneficial for you or your finances.

It’s crucial to determine whether taking on a second job is a feasible choice for you. Begin by reviewing your current job description to see if any restrictions might prevent you from pursuing additional work.

This will help you steer clear of potential conflicts, such as:

  • Is there any clause that prevents you from taking more work?
  • Speak to your current employer about it to be clear.
  • Once you are clear about it, you are good to go for a second job.

Tax on a second job - Everything You Need To Know

Tax On Second Job – The Basics:

Once you are self-assured about the rules regarding second job prevention, you need these important points to keep under serious consideration.

tax on a second job

  • You are getting at least the minimum wage from both jobs.
  • Ensure that you completely comprehend the terms and conditions written in your job contracts.
  • You have practically foreseen the roles and impacts of both jobs.

 HMRC And Tax System:

In the tax framework, your primary job serves as your main source of income. From this, you receive a personal allowance of £11,850, which is the portion of your earnings that is tax-free. Any earnings from a second job are considered additional income.

However, you won’t receive a personal allowance for this extra income, which means you may end up paying a higher tax rate on it. A wise approach is to combine this second income with your primary earnings, as it allows you to pay the same overall tax rate on both sources.

How Much Tax Shall I Pay – Second Job:

The amount of tax you owe is influenced by your total salary from both jobs. If your first job pays less than the personal allowance, the tax on your second job will typically be at a flat rate of 20%.

For instance, consider an employee earning £150 weekly from their first job and withdrawing £100 weekly from their second job.

Since the earnings from the first job fall below the personal allowance, no tax will be deducted from that income. However, the second job’s income will be taxed at the 20% rate.

It’s common for taxes on a second job to be calculated using the BR tax code. This brings us to the question: what exactly is the BR Tax code?

BR stands for Basic Rate, which is set at 20%. If your total income exceeds £46,351, you may find yourself paying more tax due to additional earnings. Below, we outline scenarios where you might end up paying either too little or too much in taxes.

  • Paying Little Tax: In case you have not informed HMRC and getting another personal allowance on the second job.
  • Paying Little Tax: You pay basic tax on both jobs while your second job makes you a high rate tax band.
  • Paying Too Much Tax: This happens when the salary you take from both jobs is less than your allowance.

Avoid Under And Over-paying Tax:

It is important to get a starter form P46 from your employer when you start a new job. This form includes the details of other jobs and it is then sent to HMRC. It is also suggested to ensure your tax codes. Generally, the second job has the BR code after a number.

Pensions and Second Job:

Ensure the hold of records and details if there is a possibility of pension in your second job. In case you are making less from your second job and this makes you pay less into the pension as well. It is suggested to put this amount with other pension pots when you decide to leave the second job.

Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!

Conclusion:

To conclude the discussion we can say that there is no way to escape from Tax on a second Job. The suggestion is to inform HMRC about it and make the smartest way out to pay tax on a second job with the above recommendations. We hope this blog is convincing enough to make you follow the guided rules.

 

Disclaimer: The information about Tax on a Second Job, provided in this article including text and graphics. It does not intend to disregard any of the professional advice.

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