It is possible to work both as an employee and self-employed; however, the income is treated differently. Employment income is typically taxed through PAYE, while self-employed income and allowable expenses are reported through Self Assessment when required. Working two jobs does not give you two Personal Allowances. Having both sets of records in order will make it easier to report your earnings accurately and prepare for any additional tax.
You must include your employment earnings and profits from your taxable business activity when calculating your total Income Tax liability. Your overall taxable income is considered when determining the applicable tax rate.
Self-employed profit is not simply the amount that customers pay you. Your business profit is calculated by deducting allowable business expenses from your trading income.
There is normally one Personal Allowance applied to your total income. If your Personal Allowance is already used against your employment income, additional profit from your business could be subject to tax from the first pound, depending on your overall income and available allowances.
Additional profit may also push some of your income into a higher tax band. Your location matters because Scottish Income Tax bands differ from those applicable elsewhere in the UK for non-savings, non-dividend income. Check the relevant year's Income Tax rates and allowances on GOV.UK.
Suppose your salary is £28,000 a year, and freelancing generates an additional £7,000. After deducting £2,000 of allowable business expenses, your freelance profit is £5,000.
Your total income before the Personal Allowance and other adjustments is £33,000. Tax already deducted from your employment income through PAYE is taken into account when calculating your final tax liability.
If you earn more than £1,000 in gross trading income from self-employment in a tax year, before expenses, you usually need to register for Self Assessment, subject to the applicable rules. Having a PAYE job does not automatically exempt you from this requirement.
The threshold is based on trading income rather than profit. For example, freelance income of £1,500 a year with £900 of allowable expenses would still exceed the £1,000 gross trading income threshold.
Other circumstances may require you to submit a return even if your trading income is below this threshold. If HMRC requests that you file a return, do not assume that you are exempt. Contact HMRC if you believe the notice should be withdrawn.
The usual deadline for notifying HMRC that you need to file your first Self Assessment return is 5 October following the end of the relevant tax year. Online filing and payment are generally due by 31 January.
For the 2025/26 tax year, the usual notification deadline is 5 October 2026, and the online filing and payment deadline is 31 January 2027. If you have not registered, contact HMRC as soon as possible to confirm the steps and deadlines that apply to you. Visit GOV.UK Self Assessment guidance for further information.
Maintain employment records alongside your business records. Even if your employer has already deducted tax, you need information about both sources of income when completing your return.
Gather the following documents and information:
Self Assessment support can help you identify the information that should be checked before submitting your return.
Allowable business expenses may include business insurance, relevant software, office supplies and qualifying business travel costs, provided they meet HMRC's rules.
If an expense has both personal and business uses, claim only the portion relating to your business. An expense does not become tax-deductible simply because you paid for it from a business bank account.
You may be able to use the £1,000 trading allowance instead of deducting actual business expenses, if eligible. You generally cannot claim the allowance and deduct actual expenses against the same trading income. Compare the available options before deciding which method is appropriate.
Estimate your likely tax liability and develop the habit of saving money regularly. Do not assume that the deductions from your payslip will cover the tax due on your self-employed profits.
Class 1 National Insurance is usually deducted by your employer. Class 4 National Insurance contributions may also be due on self-employed profits, depending on the applicable rules and thresholds. Your overall position depends on the interaction between your employment and self-employment income.
Do not calculate your National Insurance liability simply by applying the percentage shown on your payslip to your freelance profits. Read HMRC's National Insurance guidance for self-employed people to understand the relevant rates and thresholds.
Be sure to check whether payments on account apply to you. These advance payments towards the following tax year's bill are generally due in January and July. They can increase the amount you need to budget for at each deadline. Payments on account do not apply in every situation, including certain cases where more than 80% of the relevant tax was collected outside Self Assessment or the previous year's tax bill was below £1,000. Check the relevant GOV.UK guidance on payments on account.
One of the best practices is to:
These answers cover common concerns about Personal Allowances, salary reporting and running a business while employed.
No. You normally receive one Personal Allowance against your total eligible income, rather than separate allowances for employment and self-employment. If your allowance is already used against your salary, additional business profits may be taxable. The final amount depends on your total income, available reliefs and the applicable tax bands.
Yes, if you are required to complete a Self Assessment return, you should enter the relevant employment income and tax deducted in the appropriate sections. Useful figures are available on your P60 or P45 and other employment records. Reporting your salary allows HMRC to calculate your overall tax position and account for tax already paid through PAYE.
A low profit does not automatically remove your reporting obligations. The usual £1,000 trading threshold is based on gross trading income before expenses, and other circumstances may also require a return. You may need to report your activity even if little or no tax is due. Review your circumstances rather than making a decision based only on the amount remaining after expenses.
No. Many people complete their own tax returns when their records and circumstances are straightforward. An accountant or tax adviser may be helpful when expenses are unclear, income comes from several sources or the tax calculation is complicated. Whether you file independently or use an adviser, review the figures carefully and retain the supporting documentation.
Self Assessment Help can help you organise the information required to report your employment income and self-employed profits together. We can guide you through the records you need, the expenses you may be able to claim and the steps involved in preparing your return.
Contact our team to discuss support before filing if you are unsure how your employment and business figures fit together.