Is it Worth Taking A Part-Time Job on A Pension?

Hello there,

Yours is not an uncommon situation; more and more individuals who derive the bulk of their income from a pension are looking to take on part-time jobs in order to top up this income. However, as you have pointed out, working while retired can have significant tax implications. This is particularly the case for those who receive a private pension, as a part-time job could push them into the next tax bracket.

Personal Allowance

From looking at your tax code, it can be seen that you can currently earn £12,570 per annum before you are required to pay tax. If you were to work in your part-time job 52 weeks per year, you would earn an extra £7,040.80. If you take on a second job, all of your income will be bundled together for tax purposes. As such, the rate of any tax paid on pension income may change if your total income exceeds your Personal Allowance. You have not stated how much your pension income is. However, regardless of this the income derived from your part-time job, would push you over your personal allowance of £12,570 anyway.

The BR tax code appears when the basic rate of tax applies to all of your income. This is almost always the case for those with two jobs, as their personal allowance will have been used up by their primary employment. In your case, even working while retired, rather than working two jobs, the BR tax code will almost certainly apply as your part-time job will use up your personal allowance. As such, you will be taxed on the excess £470.80 at basic rate of 20% in the tax year.

National Insurance Contributions

The tax paid on pension income may seem to increase as a percentage, although this will be offset by the extra money you are earning. On its own, the income from your part-time job will not incur a National Insurance liability as it falls below the lowest earnings bracket of £116 per week for primary Class 1 contributions. However, if your total income exceeds this figure, you are likely to be charged Class 1A Contributions at a rate of 12%. This will not apply, however, if you have reached State Pension age (currently 66 for both men and women). In these cases, National Insurance is no longer levied.

*Figures have been adjusted to relate to the current 2018-19 tax year.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Income Tax Calculator lets you enter your salary and get a clear breakdown of your income tax, National Insurance, and take-home pay for the 2025/26 tax year. See exactly where your money goes. Try it now →