Self Assessment If You're Employed and Self-Employed
Having both employment income (PAYE) and self-employment income is increasingly common. Your employer handles your PAYE tax, but you need Self Assessment for the self-employed portion. Here is how it works.
How Your Tax Is Calculated
Your employment income and self-employment income are added together to work out your total taxable income. Your employer deducts tax through PAYE, and Self Assessment handles the rest.
HMRC uses the figures from both sources to calculate whether you have paid enough tax overall. The Self Assessment calculation takes into account tax already deducted through PAYE.
What You Report
On your Self Assessment return, you include:
- Your employment income (from your P60)
- Tax already deducted by your employer
- Your self-employment income and expenses
- Any other income (savings, dividends, rental)
HMRC calculates the total tax due and subtracts what has already been paid through PAYE. The difference is what you pay through Self Assessment.
Tax Rate Impact
Your self-employment profit is effectively taxed at your marginal rate. If your PAYE salary uses up your personal allowance and basic rate band, your self-employment income may be taxed entirely at 40%.
Example: If you earn £45,000 in employment, only £5,270 of basic rate band remains. Self-employment profit above £5,270 is taxed at 40%.
National Insurance
You pay:
- Class 1 NI through your employer (on employment income)
- Class 2 NI through Self Assessment (on self-employment income, if profits exceed £12,570)
- Class 4 NI through Self Assessment (6% on profits between £12,570 and £50,270, 2% above that)
There is no overlap — each class applies to a different income source.
Practical Tips
- Keep your employment and self-employment records completely separate
- Use a dedicated bank account for your self-employed income
- Budget for the higher tax rate on your side income
- Accounted factors in your PAYE income when calculating your tax estimate
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Tax & Compliance Specialists
Our tax specialists have decades of combined experience in UK sole trader and small business taxation, MTD compliance, and HMRC submissions. All content is reviewed against current HMRC guidance before publication and updated quarterly to reflect legislative changes.
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