Wondering how to work out tax on a second job? If you’re joining the growing trend of running a small business on the side, it’s important to make sure you’re paying the right tax.
Perhaps you’re looking for additional income, or you want to turn a hobby into a business. Maybe you’ve even found a passive income stream alongside your full time job. Whatever your reason for working a side hustle, it’s important that you understand how much tax on a second job you might need to pay.
- How much tax do you pay on a second job?
- Legal implications of working two jobs
- Second job tax calculator
- Understanding National Insurance Contributions
- Side hustle tax deductions
- Tax on second job – changes you need to know
- HMRC second job tax codes
- Penalties for not paying the right second job tax
- Success story – from side hustle to full time job
- Second job tax FAQs
How much is second job tax?
The amount of tax on a second job you pay depends on how much you’re earning in both, whether you’re employed and self-employed or own two businesses yourself.
Key things to look for:
- freelancing might push you into a higher tax bracket
- there might be a conflict of interest with your main job
- you’ll need to complete a Self Assessment every year
Read on to find out about side hustle tax, and what self-employed tax and National Insurance you need to pay if you’re both self-employed and employed.
Legal implications of working two jobs in the UK
Legally, there isn’t anything stopping you from working two jobs. You don’t have to tell your employer, but it can be a good idea to make sure there’s nothing in your employment contract that would prevent you from starting your own business – if there’s a conflict of interest, for example.
It’s worth remembering that if you choose to register as a limited company your business will appear on Companies House and information will be public anyway.
Can you be employed and self-employed?
It’s possible to be self-employed and work a full-time job. This can be a good idea to reduce any financial risk while you’re building your business.
If you’re still weighing up the pros and cons of being your own boss and taking the leap into the world of contracting, read our tips on going self-employed.
How much can I earn before tax?
You’re allowed a £1,000 tax-free trading allowance, which means you don’t need to tell HMRC about any income until you make more than that in one tax year. This is separate to any income you make through your employed job. The trading allowance applies to all of your other income streams. You don’t get a trading allowance for each separate income outside of your main job.
The government recently announced that it plans to increase the reporting threshold for trading income to £3,000 by the end of 2029. This means if you earn between £1,000 and £3,000 from a second job, you won’t have to submit a Self Assessment (but you will still have to pay tax).
If you have a primary job where you’re employed, in most cases HMRC will put your full personal allowance (£12,570 a year) towards your main job. This means you’ll be taxed on everything you earn over £1,000 from your second job.
Read more about tax-free allowances.
Image credit: Simply Business
Register as self-employed
When it comes to starting a business (even when you still have a main job), one of the first things you’ll need to do is register as self-employed with HMRC – you’ll need to do this before 5 October to avoid any penalties.
This is so you pay the right amount of side hustle tax, as this income won’t be taxed through PAYE.
You can register as self-employed through the government website. You’ll need to provide information such as your National Insurance numbers, your address, and details about your self-employed job.
Learn more about how to register as self-employed.
File your Self Assessment tax return
You’ll need to file your Self Assessment tax return by 31 January each year. Read our guide on how to do a self-employed tax return and check important tax year dates you need to be aware of.
It’s important that you’re correctly reporting the income from your second job on your tax return. As of 1 January 2024, HMRC has been asking many popular side hustle platforms to report how much money individual users are making on the platform.
This means that HMRC are able to cross check the information on your tax returns with the numbers provided by the digital platforms.
These changes are part of a wider crackdown on tax avoidance, so won’t affect you if you’re correctly reporting your second job income. You can learn more about the latest HMRC reporting changes in our guide.
Second job tax calculator
Income tax is levied on profits or income in each tax year. This is based on combined income from both your main job and self-employment. So this could mean your profits as a sole trader push you into a higher tax band.
As an employee, your payslip will show how much income tax you pay and this will be automatically deducted from your salary. However you’ll need to also detail this on your Self Assessment tax return so HMRC knows what you’ve already paid.
If your second job is also on an employed basis, you’ll usually pay income tax at a basic rate on earnings over the £1,000 threshold.
As a self-employed person paying tax on a second income, you’ll need to work it out slightly differently. This is because income tax is based on your profits and you can deduct things like allowable expenses.
HMRC has a second job tax calculator to help you work out what you’ll need to pay on your side hustle.
Second job tax example
You work as an events manager for a hospitality company, earning £35,000 a year. This is your primary job. You also sell homemade candles on Etsy, making £6,000 a year in total. This is your second job.
Here’s what your income tax calculation could look like:
Your £35,000 (annual salary) + £6,000 (side hustle earnings) = £41,000 (total earnings)
- £35,000 – £12,570 (personal allowance) = £22,430
- 20% (basic rate of income tax) of £22,430 = £4,486
- £6k (side hustle earnings) – £1,000 (trading allowance) = £5,000
- 20% (basic rate of income tax) of £5,000 = £1,000
- £4,486 (main job income tax) + £1,000 (side hustle income tax) = £5,586 (total tax)
£41,000 (total earnings) – £5,586 (total tax) = take home pay of £35,414
It’s important to note that there are slightly different rates if you live or work in Scotland.
Read our guide to income tax to understand more about the tax rates when you’re self-employed.
Tax is complicated and this article is intended as a guide. If you aren’t sure, it’s best to seek financial advice from a professional.
Understanding National Insurance Contributions
As with income tax, your National Insurance Contributions (NICs) will come out of your salary automatically through PAYE. This is known as Class 1 National Insurance.
You may also need to pay National Insurance on income from your side business. You’ll pay Class 4 NICs if your profits are £12,570 or more a year and can make voluntary Class 2 contributions. Our National Insurance guide for the self-employed goes into more detail on rates and thresholds.
The government website also has a tool for you to check your National Insurance record.
Side hustle tax deductions UK
You can claim allowable business expenses on your side business just as you would as a sole trader without another job. This means you can deduct certain costs – such as office supplies and travel – from your annual turnover and only pay tax on your taxable profit.
Changes to second job tax 2025
As we mentioned above, the government has recently introduced rules for popular side hustle platforms to report how much money their users are making to HMRC.
This is to increase visibility of income for people who make money from digital platforms and make sure side hustlers are paying the right amount of income tax.
The changes to digital reporting affect platforms such as:
- Deliveroo and Uber Eats
- Uber and Bolt
- Vinted, eBay, and Etsy
- Airbnb
The other significant change to second job tax is the government’s plan to increase the income tax reporting threshold for side hustlers from £1,000 to £3,000 by the end of 2029.
Read more: Five new tax laws for businesses in 2025
Tax code for second job – do you need one?
If your second job is on a self-employed basis, you’ll pay tax through Self Assessment and won’t need a tax code. You will, however, have a tax code for your employed job. This is because tax codes are part of the PAYE system and used by HMRC to tell your employer how much tax to deduct from your pay.
Read our guide to tax codes for more information.
What happens if I don’t pay the correct tax on my side hustle?
If you don’t pay the right amount of tax, you could face a tax investigation or a fine or penalty from HMRC.
You could get a penalty or fine for an inaccuracy on your tax return, as well as late payment or late filing of your tax return. You could also receive a penalty if HMRC investigates your tax affairs and you don’t have adequate records.
Fines and penalties range from £100 to 100 per cent of the tax you owe, which could be a significant sum.
Stay up to date with key tax year dates for the self-employed.
Success story – from side hustle to full time job
Bailey Greetham-Clark is the owner of BeGreatFitness – which started out as a side hustle when Bailey was just 17 years old. While the company is now Bailey’s sole focus, he was in full time employment when BeGreatFitness started as his second job.
On working a second job, Bailey says: “I had a job in marketing and sales to support me starting a business. I was inspired to start BeGreatFitness because of my own personal struggles with mental health, as exercise helped to take me out of a really dark place as a young person.
“I was working in my job alongside starting my business for around ten months. I then had the opportunity to pick up a contract that would support half my weekly income and decided it was the very closest I would get to it being the ‘right time’.
“Now my business is going extremely well. We have a small team of three and work out in schools, care homes, and with charities to make fitness accessible to all.”
Second job tax FAQs
How do I keep track of my income from both jobs for tax purposes?
You can track your income from multiple jobs using a range of tools. For example, you could take manual records and use spreadsheets or use accounting software.
You’ll need to keep track of key information such as when you were paid, who by, and how much you received.
Do you get taxed more on a second job?
If both of your jobs pay you through PAYE then you won’t need to tell HMRC. Your tax will be worked out based on your combined income. Bear in mind though, having a second job could put you into a higher tax bracket.
Paying tax on a side business works differently if you’re self-employed. You’ll be able to earn a certain amount before paying any tax on your side hustle.
What if I don’t tell HMRC about my second job?
If you don’t tell HMRC about your second job, you could be underpaying tax or issued with the wrong tax code.
Not paying the right amount of tax could lead to financial penalties, interest, or even an HMRC investigation.
Can I claim any expenses related to my second job to reduce my taxable income?
If you have a second job that’s self-employed, you can claim expenses to reduce your tax bill.
It’s important to note that any expenses you claim must be wholly and exclusively for your second job.
Read our guide to self-employed expenses for more information.
What happens if I don’t file my Self Assessment on time for my second job?
If you don’t file your Self Assessment for your second job by the deadline, you’ll receive a late filing penalty of £100.
You could then receive further penalties and owe interest on your tax depending on how much you owe and how long your payment is overdue.
Read our guide to HMRC penalties for Self Assessment for more details.
Will HMRC know I have a second job?
If you have a second job that’s self-employed, HMRC might be able to find out if you don’t pay income tax.
This is because if you use a digital platform for your job, such as Etsy or Uber, they’re now required to report users’ income to HMRC.
Do you pay NI on a second job?
If you have a second job that’s self-employed, it’s likely you’ll need to pay Class 1 and Class 4 National Insurance Contributions.
How much can I earn before I pay 40% tax?
For the current 2025-26 tax year, you pay 40 per cent tax on any earnings above £50,270. The personal allowance (which you pay no tax on) is £12,570. Anything you earn between the personal allowance and £50,270 is subject to the basic rate of income tax (20 per cent).
Guides to help you start your business
Getting your head around business admin, legal and financial responsibilities, and important licences can feel overwhelming. These guides are created to help you understand every step to setting up your side business:
- How to start a side hustle
- How to become a freelancer
- How to achieve work life balance when you have a side hustle
- What business insurance do I need?
Ready to set up your cover?
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