How Your Tax Code Works with Two Jobs: A Simple UK Guide

Tax obligations across two jobs often creates confusion for employed workers and can mean you pay too much tax.

Your tax situation becomes a bit more complex when you have two jobs because of the way the PAYE tax system works.

A common example is when your personal allowance might apply to just one job.

Your second job usually comes with a different tax code such as BR (basic rate), which means no tax free personal allowance applies.

But you can split your personal allowance between both jobs if each pays less than your personal allowance in that tax year.

Your personal allowance works differently when split between jobs, and understanding why your second job receives a distinct tax code prevents costly mistakes.

This guide explains exactly how tax calculations work across two employments. You’ll discover the correct approach to managing your tax codes and identify opportunities to reduce unnecessary payments through proper understanding of the system.

Understanding your tax code with two jobs

The UK tax system works on a Pay As You Earn (PAYE) basis, which means your employer deducts tax before paying your wages.

When you’re balancing multiple jobs, understanding how your tax codes function becomes crucial to ensure you’re paying the correct amount.

How does tax work with 2 jobs?

The tax system handles multiple jobs separately but calculates your total tax based on combined income.

HMRC labels one job as your main employment and others as secondary. This difference matters because it determines how your personal allowance applies.

You can earn up to your personal allowance before paying income tax and anything after that needs to be taxed.

Only one personal allowance is given per tax year, whatever number of jobs you hold. The PAYE system adds the PA to your main job, which usually pays more.

Your employer should tell HMRC about your income details when you start a new job by using your P45 or starter checklist.

HMRC then generates a new tax code with the aim of collecting the correct amount of tax throughout the tax year.

Why your second job has a different tax code

Second jobs receive different tax codes because your personal allowance already applies to your primary employment.

HMRC tries to prevent double allocation of tax-free allowances, which would typically create an underpayment of tax.

For example if you have a full-time job with a tax code including your personal allowance and you take on an evening part-time job.

If both employers used the same code, the system would incorrectly give you two personal allowances. This would effectively allow you to earn twice the tax free amount which you are not entitled to.

Your second job also requires appropriate coding to reflect higher and additional tax rates for the same underpayment reason.

What tax code for second job means

Second job tax codes reveal specific taxation approaches for that income stream. Common codes include:

• BR (Basic Rate) – 20% taxation applies to all earnings without personal allowance. Most second jobs use this standard code.
• D0 – 40% higher rate taxation covers all income when combined earnings exceed the higher rate threshold.
• D1 – 45% additional rate tax applies.

Different tax codes can be used for second jobs in Scotland.

Jobs paying below the personal allowance threshold might create a tax refund through BR coding.

HMRC allows personal allowance splitting between positions in these cases. This can be a good option with stable and predictable income streams, as variations could trigger underpayment.

Payslip monitoring remains essential for tax code accuracy. The same tax code appearing on payslips from both jobs may indicate incorrect double personal allowance allocation.

This mistake creates temporary benefits but a potential future tax bill once HMRC discovers the error.

Common tax issues with two jobs

Multiple income streams frequently create tax complications that can mean you pay too much or too little income tax.

Several predictable issues arise when managing two jobs:

Overpaying tax due to BR code

BR codes tax every pound earned at 20% from your second job. This approach works correctly in most situations. Certain circumstances create overpayment problems:

• Both jobs fall below the personal allowance threshold, yet the second position faces 20% taxation
• Your primary job fails to utilise the complete personal allowance, leaving unused tax-free amounts

You will normally qualify for a tax refund in these situations which HMRC should repay automatically when the overpayment has been detected.

This can happen either after the tax year end on the 5 April or during the tax year through your salary.

Underpaying and facing a tax bill

Tax underpayments occur through several routes:

• Combined earnings exceed higher tax thresholds: If your second job has a BR code rather than D0 or D1 you will underpay tax.
• Duplicate personal allowances: Two jobs both using a tax code including your personal allowance will incorrectly double your tax-free allowance.
• Untaxed income: For example rental income that isn’t accounted for in tax code calculations.

HMRC sends tax calculation letters (P800) or simple assessment letters once underpayments surface.

Underpayments of tax are often included in your tax code to allow for the tax to be repaid over time and not in one lump sum.

Suspected tax code errors can be addressed through HMRC’s Check your Income Tax online service for employment detail updates or income change notifications.

Special cases: self-employment, pensions, and benefits

Standard employment situations represent just one part of the tax landscape. Certain income combinations create additional considerations that require specific attention.

Self-employed as a second job

Self-employment alongside traditional employment demands particular tax management. Essential requirements include:

• Register as self-employed with HMRC promptly.
• File a self assessment tax return annually by 31 January.
• Pay your own tax and National Insurance contributions.

Self-employment taxes operate on a different timeline than PAYE – you pay one year in arrears. For example tax on earnings from the 2024/25 tax year must be settled by January 2026.

Your self assessment must include all income sources, not just self-employment earnings.

Receiving state pension and working

State Pension represents taxable income, though payments arrive without tax deductions. Continued employment while receiving pension income means your employer will deduct tax through PAYE.

Total income including pension that exceeds your personal allowance faces taxation on the excess. HMRC may issue a simple assessment letter requesting payment if PAYE adjustments cannot cover the tax due.

How second job affects Universal Credit

Universal credit decreases as employment income rises. Each £1 earned reduces universal credit by 55p. This reduction applies regardless of whether income comes from one job or multiple employments.

Self-employed second jobs require monthly reporting of income and expenses. Fluctuating self-employment earnings can complicate benefit calculations.

Tips to manage your tax across two jobs

Proper tax management across multiple jobs requires consistent attention to detail. These practical steps help you maintain control over your tax obligations and avoid costly mistakes.

Check your payslips regularly

Payslip review should become routine practice for multiple job holders. Your main job should typically show a tax code that reflects your personal allowance, whilst your second job should display BR, D0 or D1. Early detection of discrepancies prevents both overpayments and unexpected bills.

Use HMRC’s personal tax account

HMRC’s personal tax account offers secure online access to your tax information. This free service enables income estimate checks, tax code tracking, and employment detail updates. You can access explanations for tax code changes and spot problems before they escalate.

Request to split your personal allowance

Contact HMRC to divide your personal allowance between jobs when both pay less than the threshold. Pursue this option only when income from each job remains stable and predictable, since fluctuations may create underpayment issues.

Keep records for self-assessment if needed

Self-employed second jobs require meticulous record-keeping of all income and expenses. Detailed documentation proves essential for completing your annual Self Assessment tax return by 31 January.

Plan for higher tax bands

Build savings when your combined income approaches higher tax thresholds. This financial preparation cushions against surprise bills when HMRC reconciles your tax situation, particularly during mid-year income increases.

Key Takeaways

Understanding how tax codes work across multiple jobs can save you from overpaying or facing unexpected bills at tax year-end.

• Your personal allowance applies to only one job, typically your main employment, whilst second jobs usually get a BR code taxing all income at 20%.
• If both jobs pay less than the personal allowance combined, you can contact HMRC to split your personal allowance between them to avoid overpaying tax.
• Check payslips regularly – your main job should show a tax code that is calculated using your personal allowance, second jobs should display BR, D0, or D1 depending on total income.
• Combined income determines your tax bracket, so earning over the higher rate tax threshold across jobs triggers higher rate tax even if individual jobs seem modest.
• Set up HMRC’s personal tax account to monitor tax codes, update employment details, and spot issues before they become costly problems.

When juggling multiple income streams, proactive management prevents both overpayments and surprise tax bills.

The key is understanding that HMRC calculates tax on your total earnings, not individual job amounts, making regular monitoring essential for accurate tax payments.

FAQs

Q1. How does having two jobs affect my tax code in the UK? When you have two jobs, your main job typically receives a standard tax code, while your second job often gets a BR (Basic Rate) code. This means your personal allowance is applied to your main job, and your second job is taxed at the basic rate from the first pound earned.

Q2. Can I split my personal allowance between two jobs? Yes, if both your jobs pay less than the personal allowance, you can contact HMRC to request splitting your allowance between them. This is worth considering if your income from each job is stable and predictable.

Q3. What should I do if I think my tax code is incorrect? If you suspect your tax code is wrong, use HMRC’s Check your Income Tax online service to update your employment details or notify them about income changes. You can also contact HMRC directly to discuss your tax code and request any necessary adjustments.

Q4. How does self-employment as a second job impact my taxes? If you’re self-employed as a second job, you’ll need to register with HMRC, file a self assessment tax return annually, and pay your own tax and national insurance contributions.

Q5. Will working a second job affect my Universal Credit? Yes, working a second job can affect your Universal Credit. For every £1 you earn, your Universal Credit payment will decrease by 55p. This applies whether the income comes from one job or multiple employments. If one of your jobs involves self-employment, you’ll need to report your monthly income and expenses.