Side hustle tax UK: what you need to know about paying tax

Published Friday 12 December 2025

Table of contents

• Types of side hustles and tax implications
• How much can you earn as a side hustle before paying tax?
• Selling personal items vs running a business
• Online selling platform reporting rules
• What's the difference between a job and a side hustle?
• How do I register a side hustle in the UK?
• How to pay tax on side hustle
• Side hustle tax calculations
• What happens if you don't pay tax on your side hustle?
• Claiming tax back on side hustles
• Managing your side hustle finances with Xero
• FAQs on side hustle tax in the UK

Key takeaways

• You can earn up to £1,000 a year from your side hustle before you need to register with HM Revenue & Customs (HMRC) or pay tax.
• Distinguish between selling personal possessions and running a business, since only trading activities (buying or making items specifically to sell for profit) count as taxable income under HMRC rules.
• Claim allowable business expenses against your side hustle income to reduce your tax bill, as you only pay tax on profit rather than total revenue.
• Submit your self-assessment tax return and pay any owed taxes by 31 January following the tax year to avoid penalties and interest charges from HMRC.

Types of side hustles and tax implications

The type of side hustle you have doesn't change the main tax rules, but it's helpful to see where your work fits in. Most side hustles fall into a few common categories:

• Selling things: This could be anything from handmade crafts on Etsy to second-hand finds on eBay or Vinted. If you buy or make items with the intention of selling them for a profit, HMRC sees this as a trade.
• Providing a service: You might be a freelance writer, a delivery driver, a pet-sitter, or a consultant. You're selling your time and skills.
• Creating content: This includes earning money from social media, blogging, or making videos. Income can come from brand partnerships, ads, or affiliate links.

How much can you earn as a side hustle before paying tax?

You can earn up to £1000 per tax year from side hustles without paying tax.

The trading allowance covers additional income outside your regular employment. This means:

• No tax on side hustle earnings under £1000
• No registration required with HMRC
• No additional obligations beyond your main job

Selling personal items vs running a business

There's a key difference between selling your own unwanted possessions and running a business. If you're just clearing out your wardrobe or selling old furniture, you generally don't have to pay tax on that money.

It becomes a business when you start buying goods to sell them on for a profit, or making items specifically to sell. This is what HMRC calls ‘trading’, and the income you make from it is taxable once you earn over the £1,000 allowance.

Online selling platform reporting rules

You may have heard that online platforms like Vinted, Etsy, and Airbnb now have to share some seller information with HMRC. This is part of a new set of rules to help make the tax system fairer, alongside other changes like the new tax year basis (also known as Basis Period Reform) that took effect in 2023.

This doesn't automatically mean you'll owe tax. It's simply a way for HMRC to get a better view of money being made through these platforms. If you're already following the rules and declaring your income, these changes won't affect you.

What's the difference between a job and a side hustle?

A side hustle is any work you do outside your main job to earn additional income. This could be freelance services, online selling, or any business activity that generates money alongside your regular employment.

Here's what that could look like:

• You work a full-time job as a dental nurse. Out of hours, you crochet clothing items to sell on Etsy.
• You work a part-time job as a PR executive. Out of hours, you're a freelance writer for the pharmaceutical industry.
• You work a full-time job as an electrician. Out of hours, you run a pet-sitting service.

HMRC distinguishes between jobs and side hustles based on your earnings:

• Tax-free threshold: Earn less than £1000 per tax year and you pay no tax
• No registration required: You don't need to register as self-employed
• No declarations needed: You don't need to tell HMRC about this income

How do I register a side hustle in the UK?

Registering your side hustle with HMRC establishes your legal obligation to pay tax and enables you to submit tax returns.

Follow these steps to register:

1. First, choose your business structure. You can be a sole trader or set up a limited company. Research both to see which works best for your business.
2. Next, you'll need to let HMRC know you're self-employed. You can do this on the gov.uk website.
3. After you’ve registered with HMRC, register for self-assessment. HMRC uses your self-assessment tax return to work out how much tax you must pay.
4. You'll be sent a Unique Taxpayer Reference (UTR) in the post within 10 days of registering for self-assessment. Keep this safe; you'll use it to submit your tax return.
5. Using your UTR number, set up a government gateway account so you can submit your tax returns online.

How to pay tax on side hustle

Side hustle tax payment works differently from your main job where tax is automatically deducted through Pay As You Earn (PAYE).

When you earn over £1000 from side hustles, you must:

• Complete a self-assessment tax return for this additional income
• Submit your return by 31 January following the tax year
• Pay any tax owed by the same deadline

Read our guide on how to fill out a self-assessment tax return if you need more guidance.

Side hustle tax calculations

HMRC works out how much tax you owe on your side hustle through the self-assessment system.

How the calculation works:

• Include employment details: HMRC sees tax and National Insurance already paid through PAYE
• Combined income assessment: Your employment and side hustle income are added together
• Tax bracket implications: Additional income may push you into a higher tax rate

Important: Your total income from employment and side hustles determines your tax bracket, potentially increasing your overall tax rate.

What happens if you don't pay tax on your side hustle?

Not paying tax on your side hustle leads to serious financial consequences:

Immediate penalties:

• Fines from HMRC for unpaid tax
• Interest charges that accumulate daily
• Increasing debt the longer you delay

Take action now:Register for self-assessment and get clear on your tax obligations today.

Claiming tax back on side hustles

You can reduce your side hustle tax bill by claiming allowable business expenses against your income, and in some cases, a new loss relief even allows for trading losses to be carried back against profits from previous years.

You can claim this when you spend money on business expenses for your side hustle. Expenses are deducted from your total income, and you're only taxed on your profit. For more information, read our guide to claiming allowable expenses.

Managing your side hustle finances with Xero

Keeping on top of your side hustle finances can feel like another job in itself. Using accounting software like Xero makes it easy to run your business, not your books.

You can track your income and expenses in one place, see how your hustle is performing in real time, and get everything ready for your self-assessment tax return. Xero frees you up to focus on growing your side business. Ready to see for yourself? Try Xero for free.

FAQs on side hustle tax in the UK

Here are answers to some common queries about side hustle tax.

Do you get taxed 40% on a second job in the UK?

Not necessarily. The tax you pay is based on your total income from all sources combined, not which job it is. If your total income pushes you into the higher rate tax bracket, then that portion of your income will be taxed at 40%. Your tax code for your second job is often ‘BR’ (basic rate), which means all of that income is taxed at 20% from the start.

Do I need to tell HMRC if I earn less than £1,000?

No. If your total income from your side hustle(s) in a tax year is £1,000 or less, you don't need to register as self-employed or declare this income to HMRC. This is thanks to the trading allowance.

How much can I earn from a hobby before paying tax in the UK?

The £1,000 trading allowance applies here too. If you make money from a hobby, you can earn up to £1,000 per tax year before you need to think about tax. If you earn more, you'll need to determine if your hobby has become a business and register with HMRC if it has.