Side hustle tax UK: allowance, HMRC rules and deadlines
Find out when side hustle income becomes taxable, how to register with HMRC and what you’ll pay in 2026/27.
Written by Lena Hanna—Trusted CPA Guidance on Accounting and Tax. Read Lena's full bio
Published Tuesday 6 October 2026
Table of contents
Key takeaways
- In 2026/27, you can earn up to £1,000 of gross trading income from all your side hustles tax-free. You don’t need to tell HM Revenue and Customs (HMRC).
- Over £1,000, register by 5 October after the tax year ends. Then file your Self Assessment tax return and pay any tax by 31 January.
- You choose between the £1,000 trading allowance and your actual allowable expenses, because you only pay tax on your side hustle profit.
- Making Tax Digital (MTD) for Income Tax started on 6 April 2026 for qualifying income over £50,000. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028.
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 doesn’t change the tax rules, but it helps to know where your work fits in.
Most side hustles fall into one or more of these groups:
- Selling things you buy or make for profit, such as handmade crafts on Etsy or second-hand finds on eBay or Vinted
- Selling your time and skills as a freelance writer, delivery driver, pet-sitter or consultant
- Earning money from social media, blogging or videos through brand partnerships, ads or affiliate links
- Running several of these at once, which still counts as one pot of trading income for tax
How much can you earn as a side hustle before paying tax?
The trading allowance lets you earn up to £1,000 of gross trading income each tax year, including 2026/27, without paying tax on it. It’s one allowance for all your trading income, so a £600 Etsy shop and £500 of dog-walking add up to £1,100. The rules are set out in GOV.UK’s guidance on tax-free allowances for trading income.
Gross income is the total your customers pay you, before you take off any costs. If your total stays at £1,000 or less, you keep all of it and have nothing to register or report.
Once you go over £1,000, you register with HMRC and pick one of two ways to work out your taxable profit:
- deduct the £1,000 trading allowance from your gross income
- deduct your actual allowable expenses, which usually works out better when your costs are over £1,000
The government has announced plans for a £3,000 Self Assessment reporting threshold. It isn’t in force yet, and no start date is confirmed in legislation. It would change when you report your income, while the tax-free amount stays at £1,000.
Your salary is covered by a separate tax-free Personal Allowance. Find out how much you can earn before paying tax across all your income.
Selling personal items vs running a business
Selling personal items like old clothes or furniture is usually tax-free. 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 your gross trading income is 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 sell more than 30 items a year or earn more than €2,000 (roughly £1,700).
Platforms send this data to HMRC every January, so HMRC already has sellers’ 2024 and 2025 figures. The reporting doesn’t create a new tax. If you already declare your trading income, nothing changes for you.
How do I register a side hustle in the UK?
Registering tells HMRC you have self-employed income and lets you file tax returns. Follow these steps to get set up:
- Decide whether to run your side hustle as a sole trader or set up a limited company.
- Register as self-employed for Self Assessment, using GOV.UK’s guidance on working for yourself.
- Wait for your Unique Taxpayer Reference (UTR), which HMRC sends you by post after you register.
- Set up your Government Gateway account with your UTR so you can file returns online.
When does your side hustle need Self Assessment?
You need to register for Self Assessment if your gross trading income is over £1,000 in a tax year. The deadline is 5 October after that tax year: 5 October 2026 for 2025/26 income and 5 October 2027 for 2026/27 income.
You may also need a return for other reasons. For example, you’d file one to claim a loss or to pay voluntary Class 2 National Insurance.
Making Tax Digital for Income Tax is extra to Self Assessment. Since 6 April 2026, it applies if your qualifying income on your 2024/25 return was over £50,000. Qualifying income is your gross self-employment and property income, before expenses.
If you’re in scope, you send quarterly updates to HMRC through compatible software. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Most side hustles sit well below these limits. The test adds your side hustle to other self-employment or property income, but leaves out your salary.
How to pay tax on side hustle
Your employer takes tax from your salary automatically through Pay As You Earn (PAYE). For side hustle income, you pay the tax yourself through Self Assessment.
Once your gross trading income is over £1,000, you need to:
- report all your side hustle income on a Self Assessment return
- file your online return by 31 January after the tax year ends
- pay any tax you owe by the same 31 January deadline
- set money aside through the year so you’re ready for the bill
Read the guide on how to fill out a Self Assessment tax return for help with each section.
If this is your first return, the guide to Self Assessment as a sole trader explains what to expect.
What happens if you don’t pay tax on your side hustle?
Missing the deadline or failing to pay leads to penalties from HMRC. The charges include:
- a £100 late filing penalty straight away, then £10 a day after three months, up to a maximum of £900
- further late filing charges at six and 12 months, based on a percentage of the tax due
- interest on unpaid tax, charged daily until you pay
- failure to notify penalties if you register late, worked out as a percentage of the unpaid tax
If your side hustle has gone over £1,000 and HMRC doesn’t know yet, register as a sole trader now to keep these charges down.
Side hustle tax calculations
HMRC adds your side hustle profit to your salary and taxes the combined total. Tax already taken through PAYE counts towards your bill, so you only pay the difference.
These are the 2026/27 Income Tax rates for England, Wales and Northern Ireland:
- 0% on income up to the £12,570 Personal Allowance
- 20% basic rate on income of £12,571–£50,270
- 40% higher rate on income of £50,271–£125,140
- 45% additional rate on income above £125,140
Your Personal Allowance falls by £1 for every £2 of income over £100,000. Scotland sets different bands, so check the Scottish rates if you live there.
Say your salary is £48,000 and your side hustle makes £5,000 profit. The first £2,270 fills the rest of your basic rate band at 20%. The remaining £2,730 falls into the higher rate band at 40%.
That’s £454 plus £1,092, so £1,546 of Income Tax on your side hustle before any National Insurance. On a £45,000 salary, the same £5,000 stays inside the basic rate band and is all taxed at 20%.
Do you need to pay National Insurance on your side hustle?
National Insurance (NI) is separate from Income Tax and applies to self-employed profits above set thresholds. If your side hustle profits go over the NI threshold, you’ll pay contributions alongside your Income Tax.
For 2026/27, the self-employed NI rates work like this:
- Class 4 at 6% on profits of £12,570–£50,270
- Class 4 at 2% on profits above £50,270
- Class 2 treated as paid, at no cost, on profits of £7,105 or more
- Class 2 voluntary contributions of £3.65 a week on profits below £7,105
Class 4 is based only on your self-employment profits, so your salary doesn’t change it. You pay NI through your Self Assessment return, and Class 2 (paid or treated as paid) counts towards your State Pension.
To see where your profits sit, compare them with the latest self-employment tax thresholds.
Claiming tax back on side hustles
Allowable expenses reduce your taxable profit, so you pay less tax. You take business costs away from your income and pay tax only on what’s left. Claiming expenses replaces the £1,000 trading allowance, so it suits you best when your costs are higher.
Common costs you can claim include:
- equipment and supplies, such as a laptop, phone, craft materials or packaging
- travel, such as mileage for deliveries or trips to client meetings
- a share of rent, utilities and broadband if you work from home
- professional fees, such as accountant costs, software subscriptions and platform fees
For the full list, read the guide to claiming allowable expenses.
What records do you need to keep?
Good records make tax time easier and help 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:
- sales invoices and platform payment reports
- bank statements showing money in and out
- receipts, mileage logs and bills for business costs
- contracts and correspondence with clients
If your qualifying income is over £50,000, you’ve needed digital records since 6 April 2026. Below that threshold, paper or digital records both work, and you can check when MTD applies to you on GOV.UK.
Keeping digital records now makes April 2028 easier, when the threshold drops to £20,000. This guide to Making Tax Digital for Income Tax covers the quarterly updates and software you’ll need.
Manage your side hustle tax with Xero
Managing your side hustle finances can feel like a second job. Accounting software like Xero handles the admin so you can focus on the work you enjoy.
With Xero, you can:
- track income, expenses and receipts in one place
- connect your bank so transactions come in automatically
- see how your side hustle is performing in real time
- run reports and export data for your Self Assessment return
Keeping on top of your numbers through the year means you’re ready when your tax bill is due. Get one month free and have your records in order before your next return.
FAQs on side hustle tax UK
Here are answers to common questions about side hustle tax in the UK.
Do I need to tell HMRC about my side hustle if I earn under £1,000?
No, as long as your gross trading income from all your side hustles combined is £1,000 or less in the tax year. Check your total sales, since the limit applies before you take off any costs.
Can I claim expenses if I use the £1,000 trading allowance?
No, you use either the allowance or your actual expenses for your trading income. You can choose whichever gives the lower tax bill each tax year.
What happens if I miss the 5 October registration deadline?
Register as soon as you can, because HMRC may charge a failure to notify penalty based on the tax you owe. You can check the rules on GOV.UK’s page about Self Assessment penalties.
Do I pay tax on my side hustle if I’m already employed?
Yes, HMRC adds your side hustle profit to your salary. In England, Wales and Northern Ireland, any part of the total between £50,271 and £125,140 is taxed at 40%.
How does Making Tax Digital affect my side hustle?
It only applies once your qualifying self-employment and property income passes the threshold, which is £50,000 in 2026/27. An £8,000 side hustle with no rental income stays outside MTD for now, because your salary isn’t counted.
Has the £1,000 reporting threshold gone up to £3,000?
Not yet. The government has announced a £3,000 Self Assessment reporting threshold, but legislation hasn’t confirmed a start date. The £1,000 limit still applies in 2026/27.
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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