Payroll Adviser, Ed Knight, takes a closer look at the implications on payroll to a company or employee.
You only have one tax free personal allowance per tax year and the number of jobs you have does not affect this. The PAYE system is designed to treat one job as your main employment and the other job(s) as secondary.
If you have two employments, HMRC will generally allocate your personal allowance to your main job – normally the job which pays you the most money. The other job will then have a different PAYE code allocated to it; in most cases this will either be a BR or a D0 code, assuming you do not live in Scotland or Wales. If it is BR then tax will be deducted at the basic rate of 20%. If it is D0, it means tax will be deducted at the higher rate of 40%.
If you live in Scotland or Wales , different income tax rates and bands apply to your earned income.
National Insurance
If you have more than one employment, you might have to pay some National Insurance contributions (NIC) on income from each of your jobs.
However National Insurance operates in a different way from income tax. With tax there is a single tax-free amount available per person per tax year – the personal allowance. For National Insurance there is a separate limit for each job. The exception to this is if your employers are connected to each other, for example you work at a supermarket and a petrol station but they are both owned by the same company. In this case you would be treated as having one employer when calculating your NIC.
Auto-enrolment: workplace pensions
Employers must automatically enrol all staff who meet certain criteria in a workplace pension scheme. If you have more than one job, then each of your employers will have to check whether you are eligible for that employment separately.
This may mean that no employer needs to enrol you in a workplace pension scheme.
On the other hand, you may be eligible in one but not the other, or both.
If you are eligible in both, then you should be automatically enrolled in both workplace pension schemes (although you can decide to opt out). The contribution amounts involved are likely to be smaller than if you earned all your income from one job, because the first £6,240 of earnings in each employment are not included in the calculations.
You may be able to opt-in to a workplace pension even if you are not auto-enrolled.
Statutory sick pay (SSP)/statutory maternity pay (SMP)
If you have more than one job, you may qualify for SSP and SMP in each of them provided you earn above the lower earnings limit (LEL) for National Insurance contributions in each job and meet the other conditions.
Reach out to your Advo Payroll Adviser if you need to know more.