Whether you are a side-hustler, aspiring entrepreneur or working on your master plan to work for yourself, being employed and self-employed at the same time is a great way to keep the money coming in while you build your dream.
Can you be Employed and Self-Employed at the same time?
Yes! In fact, for those going self-employed, holding onto a job can be a great way to get together the startup money needed or
I recommend you check whether you are under any contract that prohibits you from being self-employed.
I also advise you against treading on your Employers toes, for example, by stealing clients. You don’t want to get a bad reputation and jeopardise your employment.
How Does Tax Works When You Are Employed and Self-Employed
If you have found additional work or are going self-employed on the side of your job, then there are some tax and national insurance implications you need to be aware of.
The money you earn being self-employed is untaxed.
It’s unlike your payslip, where your employer takes responsibility for calculating, deducting and paying over income tax and national insurance on your behalf.
When you’re self-employed you are responsible for working out your own taxes and filling out a self-assessment tax return form.
How Much Tax Do You Pay
The amount of income tax you pay depends on the total you earn across all your forms of income.
The current income tax rates are:
| 2020/2021 | 2019/2020 | |
|---|---|---|
| Personal Allowance | £12,500 | £12,500 |
| Basic rate 20% | £12,501 to £50,000 | £12,501 to £50,000 |
| Higher rate 40% | £50,001 and £150,000 | £50,001 and £150,000 |
| Additional rate 45% | over £150,000 | over £150,000 |
You must also pay Class 2 and Class 4 national insurance on your self-employment profits.
Here are the current rates:
| 2020/2021 | 2019/2020 | |
|---|---|---|
| Small profits threshold – no NICs below this threshold | £6,475 | £6,365 |
| Class 2 National Insurance | £3.05 per week | £3.00 per week |
| 2020/2021 | 2019/2020 | |
|---|---|---|
| Small profits threshold – no NICs below this threshold | £9,501 | £8,632 |
| Class 4 National Insurance 9% | £50,000 | £50,000 |
| Class 4 National Insurance 2% | over £50,000 | over £50,000 |
Tax and National Insurance When You’re Self-Employed (+ Free Calculator)
Example of working out your tax when you’re employed and self-employed:
Kim is employed in a part-time job, earning £15,000 and self-employed making profits of £10,000.
Kim will pay income tax of £2,500 on her combined earnings of £25,000. She will also pay Class 2 National Insurance of £156 and Class 4 National Insurance £327.
Income tax will be deducted by her employer so Kim will be able to deduct this before paying HMRC.
Do I have to pay Class 2 NIC if I am employed and self-employed?
You have to pay Class 2 national insurance even you are employed and paying Class 1.
Only only pay Class 2 national insurance once your self-employment earnings go above a certain threshold.
Depending on your earnings you may be able to apply to HMRC to reduce your class 4 national insurance contributions under the rules of the HMRC Annual Maximum.
Updated 4 February 2020
