Employed and Self-Employed at the Same Time

How the Tax Works

Your employment income and self-employment income are added together to determine your total taxable income and your tax rate. Your employer handles tax on your salary through PAYE; you handle tax on your self-employed profits through Self Assessment.^[2] GoFile’s Income Tax software lets you report both employment and self-employment income in one return.

What You Need to Report

On your Self Assessment return, you report:^[2]

Your employment income (from your P60)
Your self-employment income and expenses
Any other income (savings, dividends, rental, etc.)

HMRC calculates your total tax liability and gives credit for tax already paid through PAYE.

National Insurance

You may pay NI through both routes:^[3]

Class 1 NI on your employment earnings (deducted by your employer)
Class 2 NI on self-employment (flat rate, if profits exceed the Small Profits Threshold)
Class 4 NI on self-employment profits (6% between £12,570 and £50,270)

There are annual maximum NI rules to prevent you paying too much when you have multiple income sources.

Which Tax Band?

Your employment income uses your Personal Allowance and basic rate band first. Any self-employment profit is then added on top, potentially pushing you into a higher tax band.

Example: You earn £35,000 employed and £10,000 self-employed profit. Total: £45,000. Your PAYE covers the employment income. The £10,000 self-employment profit falls partly within the basic rate band, and you pay tax on it through Self Assessment.

The £1,000 Trading Allowance

If your self-employment gross income is £1,000 or less, you don’t need to register or report it — it’s covered by the trading allowance. Above £1,000, you must register and file.^[4]

Practical Tips

Register as self-employed with HMRC if your trading income exceeds £1,000
Keep separate records for your business income and expenses
Set aside money for tax — your self-employment tax isn’t collected until you file
Check your tax code — HMRC may adjust it to collect some self-employment tax through PAYE

Frequently Asked Questions

Can I be employed and self-employed at the same time?

Yes. Many people have a day job and a side business. Your employment income is taxed through PAYE by your employer, and you report your self-employment profits separately through Self Assessment.

Do I pay National Insurance twice if I am employed and self-employed?

You may pay Class 1 NI on employment earnings and Class 2 and Class 4 NI on self-employment profits. However, there are annual maximum NI rules to prevent you paying too much when you have multiple income sources.

Will my side business push me into a higher tax bracket?

Possibly. Your employment income and self-employment profits are added together to determine your total taxable income. If the combined total exceeds £50,270, the excess is taxed at the higher rate of 40%.

Sources

Working for yourself — GOV.UK
Self Assessment tax returns — GOV.UK
National Insurance rates and categories — GOV.UK
Tax-free allowances on property and trading income — GOV.UK