Can You Be Employed and Self-Employed at the Same Time?

Yes, you can be employed and self employed at the same time. 

Millions of people in the UK earn a salary from a job while running a side business, such as freelancing, tutoring, selling online, or contracting in the same field. 

What matters is that you declare all your income correctly. The tax treatment for each income stream is different, and the way they interact can catch people out. 

Here’s everything you need to know about being employed and self employed simultaneously.

Key points

• The two income streams are taxed together 📊
  HMRC adds your salary and self employed profits together when working out your tax band. If your job already uses up your Personal Allowance, every pound of side income is taxable.
• National Insurance is calculated separately 🧾
  You pay Class 1 NICs on your employment income through PAYE and Class 4 NICs on your self employed profits through Self Assessment. They run independently, so paying one doesn't reduce the other.
• You'll need to register for Self Assessment once you earn over £1,000 📋
  That's £1,000 gross, before expenses. Miss the 5 October registration deadline, and you could face penalties even if you don't owe any tax.
• Check your employment contract before you start trading 📄
  There's no law against running a side business while employed, but your contract may include non-compete or conflict-of-interest clauses. It's a good idea to check before you take on your first client.
• ANNA keeps your side business finances in order from day one 🚀
  With automatic bookkeeping, real-time tax estimates, and direct Self Assessment filing to HMRC, ANNA lets you know where you stand at all times, without the January panic.

Do you need to register for Self Assessment?

If your gross self employed income exceeds £1,000 in a tax year, you need to register for Self Assessment. 

You should register by 5 October after the end of the tax year in which you became self employed. If you started a side business in the 2026/27 tax year (ending 5 April 2027), the registration deadline is 5 October 2027.

You can register online through your Government Gateway account. You'll need:

• Your National Insurance number
• Your start date for self employment
• Details on the type of work you do

Once registered, you'll receive a Unique Taxpayer Reference (UTR) and be expected to file a return each year until you formally deregister. Even if your profit is low or zero in a given year, the obligation remains as long as your Self Assessment record is active.

💡 Did you know? 

ANNA calculates your Self Assessment automatically throughout the year, so you can see what you owe in real time rather than scrambling to work it out in January. You can file directly to HMRC through the app.

How Income Tax works when you’re both employed and self employed

For the 2026/27 tax year, the Personal Allowance is £12,570. This is the amount you can earn across all sources before paying Income Tax. The bands above that are:

These figures apply for England, Wales, and Northern Ireland for the 2026/27 tax year. Scotland has different rates and bands.

HMRC treats all your income as one total. Your salary usually absorbs your Personal Allowance first through PAYE. 

So if you earn £30,000 from your job, your allowance is already used up, and your self employed profits are taxable from the first pound at 20%. If your combined income exceeds £50,270, the portion above that is taxed at 40%.

Because your employer only taxes the salary they pay you, they don't automatically know about your self-employed income. You report it yourself through your Self Assessment return, and HMRC reconciles everything, adjusting your tax code if needed. Keeping track as you go means no surprises in January.

How National Insurance works

Unlike Income Tax, National Insurance is calculated separately on your employment earnings and your self-employed profits.

HMRC calculates it depending on how the income is earned:

• Your employment income: Your employer deducts Class 1 NICs through PAYE. For 2026/27, you pay 8% on earnings between £12,570 and £50,270, and 2% on anything above that.
• Your self employed profits: You pay Class 4 NICs through Self Assessment. For 2026/27, the rate is 6% on profits between £12,570 and £50,270, and 2% above that.

Class 2 NICs were abolished as a compulsory charge in April 2024. If your self employed profits are above the small profits threshold (£7,105 for 2026/27), you're automatically treated as having paid Class 2. 

This counts towards your State Pension record. If your profits are below that figure, you can make voluntary contributions to avoid gaps in your record.

Paying Class 1 through your employer doesn’t reduce your Class 4 bill, and vice versa. They're independent calculations on different incomes.

Income Tax calculations: An example

Sarah earns £40,000 from her marketing job and makes £12,000 profit from freelance design work on the side. Here's what her 2026/27 tax looks like.

Her combined taxable income is £52,000. After the £12,570 Personal Allowance, she pays 20% on the next £37,700 (£7,540) and 40% on the remaining £1,730 above £50,270 (£692). Her total Income Tax is £8,232.

Her Class 1 NICs on her salary are deducted by her employer through PAYE. On her £12,000 freelance profit, she pays Class 4 NICs at 6% through Self Assessment. 

🧠 Good to know

If your combined income takes you above £100,000, your Personal Allowance starts to taper. You lose £1 of allowance for every £2 earned above £100,000, which creates an effective 60% marginal tax rate on income between £100,000 and £125,140. An accountant can help you plan around this if you're approaching that range.

What happens if you need to make payments on account?

If your Self Assessment bill is over £1,000, HMRC may require you to make payments on account. These are advance payments towards your next year's Income Tax bill, based on your previous year's Self Assessment. 

You'll usually make two payments each year, with the first due on 31 January and the second on 31 July. They're paid in the same way as your Self Assessment tax bill.

Because they're calculated using your previous year's tax bill, your first payments on account can come as a surprise if your self employed income has increased. 

However, if you expect your income or tax bill to be lower in the following year, you can apply to HMRC to reduce your payments on account. It’s important to be realistic with your estimate, though. If your actual bill ends up higher than what you paid, HMRC will charge interest on the difference.

What you can claim as expenses

Your allowable expenses for self employment work the same way whether or not you also earn a salary from standard employment. You can claim any expense that occurred wholly and exclusively for your business.

Common allowable expenses include:

• Equipment or tools used only for your self employed work
• Software subscriptions specific to your business
• Travel to client sites (not commuting to your employed job)
• A proportion of your home broadband or phone if you work from home for your business
• Professional memberships relevant to your self employed activity
• Marketing costs like a website or business cards

You can't claim expenses that relate to your employment, your personal life, or anything with a dual purpose that you haven't properly accounted for. 

Working for an employer while being self employed 

There's no legal requirement to tell your employer about a side business, but many employment contracts include restrictive covenants covering outside work, particularly in competing industries. Breaching these could lead to disciplinary action or, in some cases, legal consequences.

Before starting any self employed work, check your contract for:

• Non-compete clauses that restrict you from working in the same sector or with similar clients
• Conflict of interest provisions that require you to disclose outside business activity
• Intellectual property clauses that could give your employer a claim over work you produce outside of working hours
• Any blanket prohibition on secondary employment

If there are clauses you're unsure about, take legal advice before you start.

🧠 Good to know

Even if your employer has no issue with your side work, keep your self employed business separate from your day job. That clarity protects you if questions ever arise about who owns what.

Making Tax Digital when you’re employed and self employed 

Making Tax Digital for Income Tax (MTD for ITSA) requires certain self employed people to keep digital records and submit quarterly updates to HMRC using approved software, rather than filing a single annual return.

The rollout thresholds are based on gross self employed and property income.

Here’s how it works:

Your PAYE salary doesn’t count towards the qualifying income threshold. Only self employed turnover and any UK property income are included. 

HMRC determines whether you need to join MTD by looking at the most recent Self Assessment return filed before your mandated start date.

How ANNA helps when you're running a side business 

Keeping your self employed finances organised alongside a full-time job takes time you probably don't have. ANNA puts your cash management, bookkeeping, invoicing, and tax admin in one place, helping you stay on top of your business without adding more work to your week.

Here’s how ANNA helps: 

• Business account: Keep your business income and expenses separate from your personal finances, making it easier to track cash flow and prepare for tax season
• Automatic bookkeeping: Categorise every transaction automatically so your records stay accurate and up to date without manual data entry
• Receipt capture: Upload and store receipts digitally, keeping important records easy to find when you need them
• Invoice creation: Create professional invoices, send them to clients, and keep track of what's been paid and what's still outstanding
• Real-time tax estimates: See your running tax position throughout the year, so you know what to save before January arrives
• Smart money pots: Automatically set aside the right proportion of income for tax every time you're paid
• Free Self Assessment filing: Calculate and submit your tax return directly to HMRC, covering both your self employed income and any employment income reported through Self Assessment
• VAT support: Track VAT, calculate what you owe, and submit VAT returns directly through ANNA if you're VAT registered
• Payroll services: Pay employees, submit RTI reports to HMRC, and manage payroll from the same account
• 24/7 support: Get help whenever you need it through ANNA's round-the-clock customer support

Open an ANNA account and spend less time on admin.