Taking a Second Job: What Actually Happens to the Tax

Every payroll system in the world has the same blind spot. Your employer knows what it pays you and nothing else. When a second employer starts paying you as well, both are applying allowances, thresholds and progressive bands to their own slice of your income as though it were the whole thing.

The tax you owe is calculated on the total. The tax withheld is calculated twice on parts. The difference has to be settled, and how painlessly that happens is the real difference between countries.

What goes wrong

Take a UK example. The personal allowance of 12,570 pounds is normally attached to your main job through the tax code. If both employers applied it, you would receive it twice and underpay tax. HMRC prevents this by issuing a BR code to the second employer, meaning every pound from that job is taxed at 20% with no allowance.

This is where the myth comes from. A BR code looks punitive next to a 1257L code, but it is not a higher rate. It is the basic rate applied without an allowance you have already used elsewhere. If your combined income stays within the basic rate band, BR is exactly right. If your combined income crosses into the higher rate band, BR is too low and you will owe money.

How different systems handle it

Country	Second job treatment	How the difference is settled
United Kingdom	BR or D0 code on the second employment	Tax code adjustment, or a bill through self assessment
Ireland	Credits and rate band split between employments on request	Balancing statement after year end
Germany	Second job falls into tax class VI, the harshest withholding	Annual return, usually producing a refund
Netherlands	Only one employer may apply the payroll tax credit	Annual return
New Zealand	Secondary tax code applied to the second job	Refund or bill at the automatic year end assessment
Australia	Tax free threshold claimed from one employer only	Annual return
France	Withholding rate set by the tax office and applied by both	Rate is already based on total income, so little to settle
United States	Each employer withholds on its own W-4	Annual return, and the Form W-4 has a multiple jobs step to prevent shortfalls

The French approach is the cleanest. Because the prélèvement à la source rate is calculated by the tax office from your last declared total income and then handed to every employer, adding a second job does not confuse the system in the same way. Details in withholding at source in France.

The German tax class VI problem

Germany is the country where the shock is largest. A second employment is taxed in Steuerklasse VI, which grants no basic allowance, no employee lump sum and no child allowances, because all of them are already applied in the main job. Withholding on the second job can easily exceed forty percent of it.

Almost all of that comes back, because the annual return recalculates tax on total income and refunds the excess. But it comes back a year later, and many people abandon the second job before discovering that. See German tax classes for what each class does.

Social contributions behave differently

Income tax is charged on the total. Social contributions frequently are not, and this creates results that look inconsistent.

Where contributions have a ceiling, such as Germany, Austria, Spain and the United States, two employers may each apply the ceiling separately and overcharge you. The overpayment is refundable but you usually have to ask.
Where there is a lower threshold, such as UK National Insurance and Irish PRSI, two jobs each below the threshold may pay nothing at all, which is an advantage rather than a penalty.
German Minijobs have their own regime entirely, with a flat employer charge and no employee tax, and a second job within that limit can be genuinely tax free. See Minijob and Midijob.

What to do before you start

Tell the tax authority, not just the employer. In the UK, Ireland and the Netherlands this is a short online form and it prevents most of the mess.
Decide which job carries the allowance. It should be the one with the higher and steadier income.
Estimate the combined total and check which band it lands in. If the second job pushes you over a threshold, set money aside now rather than finding out at assessment.
Check the contribution ceilings if you are a high earner with two employments. This is the one place where you are likely to be owed money nobody will volunteer.