Kirk Rice Blog

6 Things to Know About Tax on Extra Income: Second Jobs, Freelance Work, & MoreWritten on October 5, 2026 by Jane Page

More people than ever are earning additional income alongside their main job — from tutoring and freelance projects to selling online or taking on a second job.

Whatever the source, extra income comes with tax responsibilities. Here are six key points to help you understand the rules.

1.The £1,000 Trading Allowance

If your extra income totals £1,000 or less in a tax year, you can use the trading allowance. This means:

• You don’t need to register with HMRC for Self Assessment.
• You don’t have to pay tax on that income.

If your gross income (before expenses) exceeds £1,000, you must register for Self Assessment and report all earnings.

2. How Extra Income is Taxed

All your income — salary and extra earnings as well as any savings and pension income— is added together to determine your tax band.

• To the extent your income exceeds the tax-free personal allowance of £12,570, you pay tax at the basic rate of 20%.
• You pay tax at the higher rate of 40% on income in excess of £50,270.
• If your income exceeds £100,000 you start to lose entitlement to the personal allowance and once your income is above £125,140, you pay tax at the additional rate of 45% on the excess income.

National Insurance contributions may also be due on trading income, depending on your total earnings from each job.

3. Tax Codes for Second Jobs

When you work for an employer, the employer has to withhold tax from your earnings under the system of Pay As You Earn, known as PAYE.

PAYE is designed so that you claim the tax-free personal allowance and the basic rate bands throughout the year each time you are paid. However, you can only claim one tax-free personal allowance and you only pay tax at the basic rate on income of up to £50,270.

This means that if you take a second job, HMRC will instruct your second employer that your first employment is already claiming the personal allowance. The PAYE code for your second job will reflect these earnings should be taxed on top of the first employment. Most likely, a higher rate of tax is taken so that you don’t owe tax at the end of the year.

4. Keep Good Records

Good records make it easier to complete a tax return if your income increases in the future.

Even if you’re under the £1,000 trading allowance, it’s still smart to keep records of income and expenses in case HMRC ask about the income paid to you.

5. Digital Platform Reporting – Etsy, Vinted, eBay, Airbnb, and more

What often begins as a hobby (like selling your child’s baby clothes) could develop into something that HMRC will view as taxable trading. From 2024, digital platforms and online marketplaces are required to share sellers’ income data with HMRC. If you earn through these platforms, just be aware that your figures may already be reported. That doesn’t mean there is automatically tax to pay – you could have costs and may be able to claim the trading allowance. However, it does mean that HMRC might ask you about your trading income.

Also, trading income and income from online marketplaces won’t have tax withholding – if taxable, it needs to be reported via a Self Assessment tax return. Our team is here to help with personal income tax questions or to submit your tax returns.

6. Requirements: Making Tax Digital

In April 2026, Making Tax Digital for Income Tax Self Assessment commenced for those with total self-employment and/or property income over £50,000 a year. The threshold drops to £30,000 from April 2027. It then falls again to £20,000 from April 2028.
If you expect your trading or rental income to take you over these levels, it’s worth preparing now for digital record-keeping and quarterly updates. You can learn more in our MTD Hub here.

Need Advice?

Tax rules can change and getting them right helps you stay compliant and avoid unnecessary stress. For tailored advice and Self Assessment tax returns, contact Kirk Rice at info@kirkrice.co.uk.

Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning. eBay, Vinted, and Airbnb are trademarks of their respective owners. They are referenced here for illustrative purposes only and no affiliation or endorsement is implied.