Employed and Self-Employed? The Complete Tax Guide for 2025/26

Employed and Self-Employed: How Does Tax Work?

One of the most common situations for UK gig workers is holding down a full-time (or part-time) job while delivering for Uber Eats, Deliveroo, or Amazon Flex in their spare time.

This "hybrid" status confuses many people. Does your employer know? Do you pay double tax? How does your Personal Allowance work?

1. The Two Tax Pots

Think of your income in two separate pots, but they share the same tax-free bucket (Personal Allowance).

• Pot A (Employment): Your employer deducts tax automatically via PAYE (Pay As You Earn). They usually use up your Personal Allowance (£12,570).
• Pot B (Self-Employment): Your gig earnings are paid gross (untaxed). You must calculate and pay tax on this yourself via Self Assessment.

2. Your Tax Code Matters

Most employees have the tax code 1257L. This means you have £1,2570 of tax-free income.

Because your main job usually uses this up, your gig income is often taxed at the Basic Rate (20%) from the very first penny of profit (after expenses). There is no "second" Personal Allowance.

3. Class 1, Class 2, and Class 4 National Insurance?

Yes, you might pay National Insurance twice:

• Class 1: Deducted from your employed salary automatically.
• Class 4: You pay this on your gig profits if they exceed £12,570/year.

Good news: Class 2 NI is effectively abolished for most, and you don't pay Class 4 until your self-employed profit hits the threshold (your employed wages don't count towards this specific threshold).

4. Do I Need to Tell My Employer?

Generally, no. Your tax affairs are private. HMRC will communicate with you directly about your self-employment tax. Your tax code at work might change if you owe tax from previous years that HMRC decides to collect via your wages (this is called "coding out"), but they usually don't explicitly state it's from a "side hustle".

5. Example Calculation

Sarah earns £30,000 as a receptionist and £5,000 profit from Deliveroo.

• Employment Tax: Her £30k salary is taxed as normal via PAYE.
• Gig Tax: Her Personal Allowance is used up by her job. So, her £5,000 gig profit is taxed at 20% = £1,000 tax due.
• Class 4 NI: Since her gig profit (£5k) is under £12,570, she pays £0 Class 4 NI.

Total extra tax bill: £1,000. She files a Self Assessment to pay this.

How to Handle It

Don't wait for a surprise bill. Use GigCalc to combine your PAYE salary and gig income. We'll show you exactly what you owe so you can set it aside each month.