Do you pay tax on a side hustle in the UK?

The £1,000 trading allowance

The first £1,000 of gross income from self-employment each tax year (6 April to 5 April) is tax free. Gross means everything customers paid you, before you take off any costs. If your total is £1,000 or less, you don't pay tax on it and you don't need to report it, unless you're filing a tax return for another reason.

If you earn more than £1,000, you have a choice. You can either deduct the £1,000 allowance from your income, or deduct your actual business expenses. You can't do both. Say you earned £3,000 and spent £400 on materials. Using the allowance, you're taxed on £2,000. Using expenses, you'd be taxed on £2,600, so the allowance wins. If you'd spent £1,800, claiming expenses would leave £1,200 taxable and that would be the better option.

The allowance doesn't apply to money from your own employer (or your partner's employer), or from a company or partnership you're connected to.

When you need to register with HMRC

Once your gross side income goes over £1,000 in a tax year, you need to register for Self Assessment by 5 October after that tax year ends. For income earned between 6 April 2026 and 5 April 2027, that means registering by 5 October 2027. Our guide on how to register as self-employed walks through the steps.

You then file an online tax return by 31 January and pay any tax owed by the same date. Miss the filing deadline and there's a £100 penalty straight away, even if you don't owe anything, so put the date in your calendar now.

How side hustle tax works when you also have a job

Your salary usually uses up your £12,570 Personal Allowance, so your side profit is added on top of your salary and taxed at whichever band it lands in. In England, Wales and Northern Ireland, income between £12,571 and £50,270 is taxed at 20%, and income between £50,271 and £125,140 at 40%.

So if your salary is £30,000, your side profit has plenty of room in the basic rate band and is taxed at 20%. If your salary is £48,000, only the first £2,270 of side profit is taxed at 20% and anything above that is taxed at 40%. Scottish taxpayers have different bands, starting at 19% and with a 21% intermediate rate, so the figures change slightly.

Your employer's payroll doesn't know about your side income, so the tax on it is collected through your Self Assessment return. You can get a quick estimate for your own numbers with our side hustle tax calculator.

A worked example

Say you live in England, earn a £30,000 salary and run a small design business on the side. In the 2026 to 2027 tax year your clients pay you £8,000 and you spend £2,000 on software, equipment and advertising. Your actual expenses are bigger than the £1,000 allowance, so you claim those, which leaves a profit of £6,000.

Your salary uses your Personal Allowance and £17,430 of the basic rate band. That leaves £20,270 of the band unused, so all £6,000 of side profit is taxed at 20%. That's £1,200 of Income Tax. Class 4 National Insurance is worked out on your self-employed profit alone, not your salary, and £6,000 is below the £12,570 starting point, so there's no Class 4 to pay. Your total bill for the year is £1,200.

Two things are worth knowing on a bill this size. If you file online by 30 December and owe less than £3,000, HMRC can usually collect it through your tax code over the next year instead of in one go. If you pay it through Self Assessment instead, a bill over £1,000 may also mean payments on account towards the next year, due 31 January and 31 July. Our self-employed tax guide explains how those work.

National Insurance on side income

Your employer takes Class 1 National Insurance from your salary as normal. Your side business is separate. You pay Class 4 National Insurance at 6% on self-employed profits between £12,570 and £50,270, and 2% above that. Most side hustles never reach the £12,570 starting point.

Class 2 no longer has to be paid. If your profits are £7,105 or more you're treated as having paid it, which protects your State Pension record. Below that you can choose to pay voluntary Class 2 at £3.65 a week, though if your job already gives you a full year on your National Insurance record, you probably won't need to. You can check your record on GOV.UK.

Selling your own things vs trading

Clearing out your wardrobe on Vinted or selling an old bike on eBay usually isn't trading. You're selling personal possessions, and there's normally no Income Tax to pay. A single item that sells for more than £6,000 may bring Capital Gains Tax into play, but that's rare.

It becomes trading when you buy things in order to sell them at a profit, make things to sell, or do it regularly with the aim of making money. Flipping charity shop finds, selling handmade candles or offering paid services all count, and the £1,000 allowance and the rules above apply.

Since January 2024, online platforms such as eBay, Vinted, Etsy and Airbnb have to report sellers' income to HMRC, typically once you make 30 or more sales or about £1,700 or more in a calendar year. Being reported doesn't mean you owe tax. It just means HMRC can see the figures, so if you are trading, make sure your tax return matches.

Keep records from day one

Keep a simple record of every payment in and every business cost out, with receipts or invoices to back them up. A spreadsheet or a basic bookkeeping app is fine. A separate bank account for the side business makes this far easier.

You have to keep records for at least five years after the 31 January deadline for that tax year. It's also worth getting used to digital records now, because Making Tax Digital for Income Tax will apply to people with self-employment and property income over £20,000 from April 2028. See our guide to Making Tax Digital for sole traders.

• Date, customer and amount for every sale
• Date, supplier, amount and purpose for every cost
• Mileage, if you drive for the business
• Bank statements for the account you use

How much to set aside

The safest habit is to move money into a separate savings pot every time you get paid, so the tax bill never comes out of your everyday account. If your salary keeps you in the basic rate band, setting aside 20% of your profit covers the Income Tax. If your side profit pushes you over £50,270, set aside 40% on the part above that line.

If your profits climb past £12,570, add another 6% for Class 4 National Insurance. Putting aside a little more than you need is fine. Any extra is a pleasant surprise in January, and it helps if payments on account kick in. For tips on fitting the work itself around your job, see how to run a side business with a full-time job.