Side hustle tax UK: allowance, HMRC rules and deadlines
Learn when your side hustle income is taxable in the UK and what you need to do to stay on track.
Written by Lena Hanna—Trusted CPA Guidance on Accounting and Tax. Read Lena's full bio
Published Monday 20 April 2026
Table of contents
Key takeaways
- Recognize that you can earn up to £1,000 per tax year from a side hustle without registering with HMRC or paying tax, thanks to the trading allowance introduced in 2017.
- Register with HMRC as self-employed by 5 October following the tax year in which your side hustle earnings exceed £1,000, then submit your self-assessment return and pay any tax owed by 31 January to avoid penalties.
- Claim allowable business expenses such as equipment, travel, home office costs, and platform fees against your side hustle income, as you only pay tax on your profit rather than your total earnings.
- Keep digital records of all income and expenses for at least five years, as Making Tax Digital for Income Tax from April 2026 will require digital record-keeping and quarterly updates to HMRC.
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. This is thanks to tax-free allowances introduced in 2017 for property or trading income.
- Distinguish between selling personal possessions and running a business. 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.
Understanding how side hustles fit into the UK tax system helps you manage your finances and stay compliant with HMRC requirements.
Types of side hustles and tax implications
A side hustle is any work you do outside your main job to earn extra income. The type of side hustle you have doesn't change the tax rules, but it helps to know where your work fits in. Most fall into three categories:
- Selling things: Buying or making items to sell for profit, such as handmade crafts on Etsy or second-hand finds on eBay or Vinted
- Providing a service: Selling your time and skills as a freelance writer, delivery driver, pet-sitter, or consultant
- Creating content: Earning money from social media, blogging, or videos through brand partnerships, ads, or affiliate links
How much can you earn as a side hustle before paying tax?
The trading allowance lets you earn up to £1,000 per tax year from side hustles without paying tax. This covers additional income outside your regular employment, which means:
- No tax: You keep all earnings under £1,000
- No registration: You don't need to tell HMRC
- No obligations: No paperwork beyond your main job
Selling personal items vs running a business
Selling personal items like old clothes or furniture is generally not taxable. However, if you sell a single item for more than £6,000, you may need to pay Capital Gains Tax. Otherwise, you're simply clearing out things you no longer need.
It becomes a taxable business when you buy or make items specifically to sell for profit. HMRC calls this 'trading', and you'll owe tax once you earn over £1,000.
Online selling platform reporting rules
Since 1 January 2024, online platforms like Vinted, Etsy, and Airbnb must report seller data to HMRC. Platforms share your details if you either sell more than 30 items a year or earn more than €2,000 (roughly £1,700).
This doesn't automatically mean you'll owe tax. If you're already following the rules and declaring your income, these changes won't affect you.
How do I register a side hustle in the UK?
You must register with HMRC if your side hustle earnings exceed £1,000 in a tax year, and you must do so by 5 October in the following tax year. Registration establishes your legal obligation to pay tax and lets you submit returns.
Follow these steps:
- Choose your business structure: Decide between sole trader or limited company based on your needs.
- Register as self-employed: Notify HMRC through the gov.uk website.
- Register for self-assessment: Sign up so HMRC can calculate your tax through self-assessment registration.
- Receive your Unique Taxpayer Reference (UTR): Expect your UTR within 10 days by post.
- Set up Government Gateway: Create your online account using your UTR to submit returns.
How to pay tax on side hustle
Unlike your main job where tax comes out automatically through Pay As You Earn (PAYE), you pay side hustle tax yourself through self-assessment.
When you earn over £1,000, you must:
- Complete a self-assessment return: Report all side hustle income
- Submit by 31 January: File your return by 31 January following the tax year end
- Pay by 31 January: Settle 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.
What happens if you don't pay tax on your side hustle?
Missing the deadline or failing to pay triggers penalties from HMRC:
- Late filing penalty: £100 immediately, rising to £10 per day after three months up to a maximum of £900, with further percentage charges added at six and 12 months
- Late payment interest: Charges accumulate daily on unpaid tax
- Additional penalties: Up to 100% of the tax owed for deliberate non-compliance
Register for self-assessment now to avoid these charges.
Side hustle tax calculations
HMRC calculates your side hustle tax by adding it to your employment income. You only pay tax on the combined total that exceeds your personal allowance.
How the calculation works:
- Combined income: Your salary plus side hustle earnings are added together
- Tax already paid: HMRC accounts for tax deducted through PAYE from your job
- Tax bracket impact: Extra income may push part of your earnings into a higher rate band
For example, if your salary is £45,000 and your side hustle adds £5,000, that extra £5,000 would be taxed at 40% because it falls above the basic rate threshold.
Do you need to pay National Insurance on your side hustle?
National Insurance (NI) is separate from income tax and applies to self-employed earnings above certain thresholds. If your side hustle profits exceed the NI threshold, you'll owe contributions alongside your income tax.
There are two types of NI for side hustlers:
- Class 2 NI: £3.45 per week if profits exceed £12,570 per year
- Class 4 NI: 9% on profits between £12,570 and £50,270, then 2% above that
You pay NI through your self-assessment return, so there's no separate registration. These contributions count toward your state pension entitlement.
Claiming tax back on side hustles
Allowable expenses reduce your taxable profit, meaning you pay less tax. You deduct business costs from your income and only pay tax on what's left.
Common expenses side hustlers can claim:
- Equipment and supplies: Laptop, phone, craft materials, packaging
- Travel costs: Mileage for deliveries, travel to client meetings
- Home office: Proportion of rent, utilities, and broadband if you work from home
- Professional fees: Accountant costs, software subscriptions, platform fees
For the full list, read our guide to claiming allowable expenses.
What records do you need to keep?
Good record-keeping makes tax time easier and protects you if HMRC asks questions. Keep records of all income and expenses for at least five years after the 31 January submission deadline.
You need to keep the following records:
- Income records: Invoices, bank statements, and platform payment reports
- Expense records: Receipts, mileage logs, and bills for business costs
- Supporting documents: Contracts and correspondence with clients
You can currently store records digitally or on paper, but with Making Tax Digital for Income Tax coming in April 2026, paper receipts won't be enough. Accounting software like Xero automatically organises your income and expenses, making digital record-keeping simple.
Managing your side hustle finances with Xero
Managing your side hustle finances can feel like another job. Accounting software like Xero simplifies the admin so you can focus on your business.
With Xero, you can:
- Track everything in one place: Income, expenses, and receipts
- See real-time performance: Know exactly how your side hustle is doing
- Prepare for tax time: Generate reports and export data for your self-assessment return
FAQs on side hustle tax UK
Here are answers to common questions about managing tax on your side hustle.
Do I need to tell HMRC about my side hustle if I earn under £1,000?
No, you don't need to tell HMRC if your side hustle earns under £1,000 in a tax year. The trading allowance means you don't need to register or pay tax on earnings below this threshold.
Can I claim expenses if I use the £1,000 trading allowance?
No, you can't claim expenses if you use the £1,000 trading allowance. You must choose between claiming the allowance or deducting your actual business expenses. If your expenses exceed £1,000, you'll pay less tax by claiming actual costs.
What happens if I miss the 5 October registration deadline?
You should register as soon as possible if you miss the deadline. HMRC may charge penalties for late registration, but acting quickly reduces the risk of additional charges. Contact HMRC directly if you're unsure about your obligations.
Do I pay tax on my side hustle if I'm already employed?
Yes, side hustle income is added to your employment income for tax purposes. You'll pay tax on the combined total, which may push you into a higher tax bracket. You only pay tax on side hustle profits that exceed the £1,000 trading allowance.
How does Making Tax Digital affect my side hustle?
From April 2026, Making Tax Digital for Income Tax requires you to keep digital records and submit quarterly updates to HMRC. Using accounting software now helps you prepare for these changes and makes record-keeping easier.
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
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