More people in the UK are taking on second jobs, such as evening deliveries, selling crafts online, freelancing, or helping friends. These are great ways to earn extra money, but it’s important to understand how this income affects your finances and taxes.
Juggling Two Jobs in the UK? Here’s What HMRC Wants You to Know
HMRC expects you to report any extra income, whether informal or part-time. Ignoring tax rules can lead to penalties or unexpected bills. Knowing what income is taxable, how HMRC enforces the rules, and how to manage everything properly is crucial.
Why Second Jobs Are on the Rise in the UK
The rising cost of living, inflation, and changes after the pandemic have led many to seek side jobs. According to the Office for National Statistics, over 1.2 million people in the UK have second jobs. Some do this to meet expenses, while others start side businesses or save for retirement.
The digital age has made finding flexible work easier than ever, with options like food delivery, tutoring, and affiliate marketing. However, earning extra money comes with added responsibilities. Understanding HMRC’s rules on second income is important before you start earning.
How HMRC Views Second Jobs and Additional Income
How does HMRC classify your second job or extra earnings? All income is taxable unless it meets certain exceptions. It doesn’t matter if you earn money from an employer or individual clients—HMRC wants a complete report.
If you work in both jobs, each employer will take out tax through PAYE. The tax code for each job affects your take-home pay. Your main job usually gets your full tax-free Personal Allowance of £12,570 for the 2025/26 tax year. Your second job often gets the BR (Basic Rate) code, which means 20% tax is taken from the first pound.
HMRC might give those earning more a D0 code (40% tax) or a D1 code (45% tax) based on your total income. Incorrect tax codes can lead to overpaying or underpaying taxes, so it’s important to check and update your information when necessary.
Second Job Tax UK: How Your Income is Taxed
Understanding UK tax rules for a second job is important to avoid surprises later. Here’s a simple breakdown. Your Personal Allowance usually applies to your main job, while your second job will be taxed on all income without any allowance.
For example, if you earn £30,000 a year at your primary job and an extra £8,000 from a weekend bar job, the £30,000 is partly tax-free up to your Personal Allowance. However, the £8,000 will be taxed at 20% if your second job uses the BR tax code. This doesn’t include National Insurance Contributions (NICs), student loan repayments, or benefits.
If you don’t inform HMRC about your second job, you might underpay taxes and face backdated bills with interest. It’s best to check your tax codes early in the financial year.
Self-Employment as a Second Income: What to Do
You must follow specific rules if you earn money from self-employment, like freelance writing, selling online, or hosting on Airbnb. Register as self-employed with HMRC and file a self-assessment tax return each year. This means reporting your income and expenses and paying Class 2 and Class 4 National Insurance if needed.
Registering late can lead to penalties, so inform HMRC by 5 October, after the tax year when you started. Keep thorough records of your invoices, receipts, and allowable expenses. This helps you stay compliant and may lower your taxes. Using tax software or hiring a good accountant can make this process easier.
HMRC Second Income Rules: What Gets Reported
Being open about your income is important when you have a second job. HMRC gets information from employers, banks, and online platforms. All your earnings must be reported for tax purposes, whether from direct deposit, PayPal, or cash.
Even jobs that pay cash are not safe from taxes. Some people think that they don’t have to tell anyone if they don’t put money in a bank or report it officially. This is not true. HMRC has advanced systems; not reporting your income can lead to an investigation. If you’re unsure how to report certain income, it’s best to ask a qualified accountant like the team at Clarkwell & Co.
Tax Code Adjustments: How to Get It Right from the Start
Your tax code decides how much tax your employer takes from your pay. If your second job has the wrong code, you might pay too much or too little tax. You can ask HMRC to split your Personal Allowance or change your tax codes.
However, splitting your allowance isn’t always the best choice, especially if your second income varies. It’s usually better to give the full allowance to your main job. You can update your tax codes online through your Personal Tax Account or contact HMRC by phone or mail. Clarkwell & Co. can help you ensure you’re paying the right amount of tax at the right time.
Watch Out for Overpayments and Underpayments
Managing two income streams can lead to tax mistakes. You’ll get a refund later if you pay too much tax, but that’s money you could have used during the year. If you don’t pay enough, HMRC will send you a P800 form asking for the missing amount, which may include extra interest or penalties.
Regularly check your payslips and end-of-year summaries (P60s and P45s) to avoid surprises. You can use HMRC’s tax calculator tools or talk to Clarkwell & Co. for a complete review of your tax situation. Our HMRC Investigation Service in London is ready to help individuals who are unsure about their tax status or are facing inquiries.
Second Jobs and Their Impact on Benefits and Loans
Getting a second job can help your finances, but it might also change your benefits and student loan payments. For instance, if you earn more than a certain amount, your Universal Credit could drop by 55p for every extra £1 you make. If your income increases significantly, you might lose some benefits completely.
Your student loans will be affected, too. Plan 1 and Plan 2 payments depend on your total income, not just your main job’s salary. If your extra work raises your earnings above the repayment limit, your deductions will increase. Be aware of how this extra income could lead to new financial obligations.
How Clarkwell & Co. Can Help You Navigate HMRC’s Rules
Managing taxes from multiple income sources can be challenging, especially when balancing jobs, family, and daily life. That’s why Clarkwell & Co. Chartered Accountants in London are here to help you handle your finances confidently.
We provide personalised accounting services for those with more than one income. Our services include PAYE and Self-assessment submissions, compliance reviews, and audit support. If HMRC contacts you, our HMRC Investigation Service in London will assist you in responding quickly and accurately, with full representation.
Master Second Job Taxes with Confidence
Managing a second income is more than just making extra money; it’s about being financially responsible and following the law. The UK tax system can be tricky, but it gets easier with the right knowledge and help.
Whether you’re self-employed or have two PAYE jobs, always track your earnings, know your tax codes, and ask for help when needed. The team at Clarkwell & Co. is here to help you understand HMRC rules on second incomes and manage your taxes confidently.
