Yes, in most cases you do pay tax on a second income. If your extra earnings come from self-employment or a side hustle, the first £1,000 is covered by the trading allowance and is tax-free. Earn more than that, or take a second employed job, and the income is taxable on top of your main earnings.
The exact amount you owe depends on what the second income is, how much you earn in total, and which tax band the extra income falls into. Here are the UK rules for the 2026/27 tax year (6 April 2026 to 5 April 2027).
How much can I earn before paying tax on a second income?
It depends on the type of income.
- Self-employment or casual trading (eBay, Etsy, freelancing, dog walking, delivery driving): the first £1,000 of gross income is tax-free thanks to the trading allowance. Below this you usually don't need to tell HMRC.
- A second employed job: there is no separate tax-free amount. Your £12,570 personal allowance is normally used up by your main job, so the second job is typically taxed in full from the first pound.
- Property income (a lodger aside, renting out a room or space): a separate £1,000 property allowance applies, and the Rent a Room scheme can exempt up to £7,500.
If your only personal allowance has already been used by your main wage, every pound of a taxable second income is charged at your marginal rate.
What tax rate applies to my second income?
Your second income sits on top of your main income, so it's taxed at your highest band. The 2026/27 thresholds are:
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571-£50,270 | 20% |
| Higher rate | £50,271-£125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
So if you already earn £45,000 in your main job, a £6,000 side income would push part of you into the higher-rate 40% band. You can model the combined effect with our income tax calculator.
Bear in mind the personal allowance tapers away by £1 for every £2 you earn over £100,000, so a second income can cost more than the headline rate once you cross that line.
Do I pay National Insurance on a second income?
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Possibly.
- Second employed job: Class 1 National Insurance is worked out separately on each job, so you may pay it twice if both pay above the primary threshold.
- Self-employed second income: you pay Class 4 NI on profits above £12,570, plus voluntary Class 2 if profits are below the small-profits threshold and you want to protect your state pension.
What about a second income from dividends?
If your side income is dividends from your own company or a share portfolio, the first £500 each year is covered by the dividend allowance. Above that, dividends are taxed at the new 2026/27 rates:
- 10.75% within the basic-rate band
- 35.75% within the higher-rate band
- 39.35% within the additional-rate band
The basic-rate (10.75%) and higher-rate (35.75%) dividend rates each rose by 2 points from April 2026, so dividends within those bands are now noticeably more expensive than in earlier years. The additional rate of 39.35% is unchanged.
Do I need to register for Self Assessment?
You must tell HMRC and file a Self Assessment tax return if:
- your gross self-employed or trading income exceeds £1,000 in the tax year, or
- you have untaxed income (rent, dividends above the allowance, foreign income), or
- you sell goods or services through online platforms and pass the reporting thresholds.
The quickest way to check is HMRC's own tool, Check if you need to tell HMRC about additional income. Note the £1,000 test is on gross income before expenses, not profit, a common and costly misunderstanding.
Deadlines you can't miss
- 5 October 2027, register for Self Assessment for the 2026/27 year.
- 31 January 2028, file your online return and pay any tax due.
Miss these and you face an automatic £100 penalty, rising the longer you leave it.
Trading allowance or actual expenses, which is better?
You can either claim the flat £1,000 trading allowance or deduct your real business expenses, but not both. Use the allowance if your costs are low (under £1,000); deduct actual expenses if your running costs are higher. You'll pay tax only on the resulting profit either way.
A worked example
Priya earns £38,000 in her main job and makes £4,500 (gross) freelancing on the side.
- She's over the £1,000 trading allowance, so she registers for Self Assessment.
- After £600 of expenses, her freelance profit is £3,900.
- Her main job uses her personal allowance and most of the basic-rate band. The £3,900 sits within the basic-rate band, taxed at 20% = £780, plus Class 4 NI.
Had the same profit tipped her over £50,270, the slice above would be taxed at 40%.
Common questions
More answers on side income, registration and deadlines are in our FAQ, including how to handle income from multiple side hustles (they all share one £1,000 allowance) and what to do if you've earned untaxed income in a previous year.
Talk to a Zmartly accountant
A second income is great, an unexpected tax bill isn't. If you're unsure whether to declare, how to register, or which expenses you can claim, a quick chat can save you far more than it costs. Get in touch with Zmartly and we'll sort your second-income tax properly, on time, with no surprises in January.
