More people are starting side hustles than ever before. Whether you’re driving for delivery apps, selling products online, freelancing, or offering tutoring services, that extra income can make a real difference to your budget.
But here’s what many people don’t realize: that extra money can change how much tax you pay and might even affect the take-home pay from your main job.
In this guide, we’ll explain exactly how a second job affects your finances, what tax rules you need to know, and how to stay compliant with tax authorities.
The Most Important Rule: One Personal Allowance
Let’s start with the fundamental rule that affects every side hustler:
You only get one personal allowance per year, no matter how many jobs you have.
Your personal allowance is the amount you can earn before you start paying income tax. This amount varies by location, but the principle remains the same everywhere.
Your main job automatically uses this allowance first. If you earn £30,000 in your main job, you’ve already used up your entire tax-free allowance and are paying tax on the remaining amount.
So what happens to the money from your side hustle? Let’s look at how it gets taxed.
How Your Second Job Gets Taxed
When tax authorities know about your second income, they will usually apply a special tax code to your second job.
What This Means:
- All income from this job gets taxed at the basic rate
- You get no tax-free Personal Allowance on this income
- It’s the system’s way of making sure tax gets collected properly
Real Example:
- Main job salary: £28,000 per year
- Side hustle income: £8,000 per year
- Side hustle tax: £8,000 × 20% = £1,600
- Side hustle take-home: £8,000 – £1,600 = £6,400
You can check how different income levels affect your situation by using our Tax Calculator to see exactly how your numbers work out.
What About Social Security Contributions?
Many people forget about social security contributions when planning their side hustle. Here’s what you need to know:
Unlike your personal allowance, you often get separate contribution thresholds for each job.
This means you pay social security contributions on earnings above a certain threshold for each job you have.
This can work in your favor. If your side hustle earns less than the threshold amount, you might not pay any social security contributions on it at all.
Complete Example: Main Job + Side Hustle
Let’s look at a full example showing how both jobs work together:
| Category | Main Job (£30,000) | Side Hustle (£8,000) | Total |
|---|---|---|---|
| Income Tax | £3,486 | £1,600 | £5,086 |
| Social Security | £1,394 | £0 (under threshold) | £1,394 |
| Take-Home Pay | £25,120 | £6,400 | £31,520 |
You can calculate your take-home pay with your specific numbers to see your personal breakdown.
How Do Tax Authorities Know About Your Side Hustle?
You might wonder how tax authorities find out about your extra income. Here are the main ways:
- You tell them by registering for self-assessment
- Your employer tells them if your side hustle is another formal job
- Data systems can spot patterns in bank transfers and online payments
- Trading allowances—if you earn over certain amounts from self-employment, you must declare it
When You Must Register for Self-Assessment
You need to register for self-assessment if:
- Your self-employment income exceeds certain thresholds
- You’re working as a sole trader
- You have untaxed income to declare
- You have multiple income sources
Key things to remember:
- Register by the deadline after the tax year you started
- File your tax return by the due date
- Pay any tax owed by the deadline
Practical Tips for Side Hustlers
1. Keep Good Records
Track every payment you receive and any business expenses. This includes:
- Receipts for business purchases
- Mileage if you use your car for work
- Costs for equipment or materials
- Software or subscription costs
2. Save for Tax
Don’t get caught out by unexpected tax bills. A good rule is to save 25-30% of every side hustle payment in a separate savings account for taxes. You can plan for your tax bill by using our calculator to estimate your liability.
3. Understand Your Tax-Free Allowance
Most locations have a trading allowance that lets you earn a certain amount from self-employment tax-free. Make sure you understand what this amount is in your area.
4. Use the Right Tools
Our Salary Calculator can help you understand how different income levels will affect your overall tax situation. You can model different scenarios to see exactly how much tax you’ll pay.
5. Know the Deadlines
Missing tax deadlines can result in penalties. Mark these dates in your calendar:
- Registration deadlines
- Tax return filing dates
- Tax payment deadlines
Common Side Hustle Scenarios
Scenario 1: Casual Online Selling
If you’re selling items online occasionally, you might not need to register immediately. However, if this becomes a regular business, you’ll need to declare the income.
Scenario 2: Freelance Work
Freelance work usually needs to be declared if it exceeds the trading allowance. Keep track of all your income and business expenses.
Scenario 3: Gig Economy Work
Platform work through apps typically counts as self-employment. The platform may provide you with income statements, but it’s your responsibility to declare the income.
Key Takeaways
- Your Personal Allowance is used only once—typically by your main job
- Second jobs are often taxed at a flat rate with no personal allowance
- Social security contributions may have separate thresholds for each job
- Keep excellent records of all your income and expenses
- Save for tax from every payment you receive
- Understand the rules in your specific location
Plan Ahead with Our Calculator
The best way to avoid surprises is to plan ahead. Use our free tax calculator to see exactly how your main job and side hustle will affect your take-home pay.
Enter your main salary, then add your side hustle income to See the exact impact on your paycheck. This helps you make informed decisions about your finances and avoid unexpected tax bills.
Remember: A side hustle should improve your financial situation, not create tax problems. With proper planning and understanding of the rules, you can make the most of your extra income while staying compliant.
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