Labour market
·
Tax

Double take: workers with multiple jobs and reforms to National Insurance

Adam Corlett
Adam Corlett
David Finch
David Finch

The tax treatment of workers with multiple jobs may be reformed as part of proposals by the Office of Tax Simplification (OTS) to more closely align National Insurance (NI) and income tax. The current system of NI largely operates on a per job – rather than per person – basis, allowing a worker with two jobs to potentially earn twice as much as a person with one job before paying any NI. Proposed simplifications might address this yet would, when considered in isolation, inevitably raise the taxes of workers with multiple jobs.

In light of these possible changes, as well as interest in whether the nature of work is shifting towards one of multiple ‘gigs’, we present in this briefing note a wide range of findings about the number and characteristics of workers with multiple jobs.

Key findings

  • Around 1.1 million people work multiple jobs, making up 3.6 per cent of the workforce;
  • 590,000 of these have multiple employee roles, 120,000 have multiple self-employments, and 420,000 combine employment and self-employment;
  • Accounting for seasonal differences, the proportion of workers doing multiple jobs is at a record low, having peaked at around 5 per cent in the mid-1990s; and
  • The proportion of workers doing multiple employee jobs has fallen particularly far, and half of those with multiple jobs are now self-employed in one or all of their jobs.
  • More women than men have multiple jobs, with 25-29 and 45-54 the most common ages;
  • The most common sectors for workers with multiple jobs are not new, revolutionary industries but rather education, health and social care, arts and sports, hairdressing and bar work;
  • A majority of second jobs involve 8 hours or fewer per week and are more likely to be considered temporary, but in total across both jobs a substantial and disproportionate number of those with multiple jobs work over 40 hours a week;
  • Only a minority earn enough from their second jobs to be liable for NI on these earnings in the current system; and
  • Looking at families rather than individuals, workers with multiple jobs are more likely to live in richer households.

Recommendations

As part of a broader set of preliminary proposals, the OTS has suggested aggregating NI across each individual’s employments and self-employments with a single per-person allowance. Looking at this proposal in isolation, we find that:

  • It would mean a tax increase of up to £19 a week for a worker with two employee jobs (or almost £1,000 for a full year);
  • Of the working-age families containing an individual with multiple jobs, 22 per cent earn too little from their employments to be affected by aggregation, a further half would lose up to £10 a week and the remaining 28 per cent could lose over £10 a week;
  • Given the distribution of working-age families containing an individual with multiple jobs, and their levels of earnings, the poorest two fifths would be least affected in aggregate both in absolute and proportional terms;
  • There would nonetheless be some significant individual losers among low and middle families, though in small part this would be mitigated by Universal Credit (if in place), as any loss would be reduced by 65 per cent due to its system of post-tax means-testing; and
  • This change in how NI works could by itself raise £380 million in extra NI (based on 2014-15 data), with an overall net effect on the Exchequer of £360 million when taking into account the resultant increase in Universal Credit entitlement (assuming this system is in place).

Further reading

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Adam Corlett
Adam Corlett Principal Economist
David Finch
David Finch