For a lot of people, a second job is vital to being able to survive and pay their monthly bills. For my family and me, we could not survive without taking on second jobs and earning a second living. It pays for holidays and helps bolster the pension fund, but like all income I make, I need to pay tax whether it’s my primary or secondary job.
This brings up the question, how much tax you pay on a second job?
Are You Allowed A Second Job
Before you start thinking about a second job, you need to understand whether you’re allowed to take on an official second job.
Many employment contracts restrict you on a second job as it can be seen as a conflict of interest especially if you’re working in a similar company, or working hours when you should be working in your first company.
If you’re allowed a second job, how much tax you pay really depends on how much you earn and what income tax bracket you fall under.
Tax On Your Second Job
Each year, you’re allowed to earn £12,500 without paying income tax. This is called your personal allowance. Once you’ve earnt more than £12,500, you will start paying the basic rate of tax which is 20% on any additional income up to £50,000.
As an example;
- If you earn £6,000 from your first job and £3,000 from your second job, your total income is below the £12,500 personal allowance, and because you’re allowed to split your Personal Allowance, you’ll pay no income tax.
- If your first job pays £18,000 a year and the second £8,000, your Personal Allowance is applied to your main job, and you pay a Basic Rate of 20% on everything above £12,500. In this case you would pay 20% on the £5,500 above your £12,500 and 20% on the £8,000 for your second job.
- If your first job pays an income of £40,000 a year, and you have a part-time job paying £25,000 a year. This means you would have a total income of £65,000. Your Personal Allowance would be consumed with your first, and you’d pay 20% basic rate on anything above £12,500, but given your total earnings are above £50,001, you pay a higher rate of tax on anything above this figure.
Income tax is something that is very difficult to get away from. Realistically I can only think of two ways, firstly you could become and expat in a Tax-Free country such as the middle-east, or you can use the extra income to pay into a SIPP and claim the tax rebate.
Remember, up to your SIPP allowance of £40,000 per year, you’re allowed to claim back your 20% for basic tax, and higher or additional-rate taxpayers can claim back a further 20% or 25% respectively.