Side hustle income is taxable if it exceeds £1,000 per year. The Trading Allowance covers small amounts tax-free—you don't need to register or report income under this threshold. Above £1,000, register for Self Assessment and pay Income Tax on your profits (after deducting expenses).
This guide explains when side hustle income is taxable, how to report it, and what you can claim.
The £1,000 Trading Allowance
The Trading Allowance gives you £1,000 tax-free from self-employment or trading income each year.
| Side Hustle Income | Tax Treatment | |-------------------|---------------| | £1,000 or less | Tax-free—no action needed | | Over £1,000 | Register for Self Assessment |
What Counts as Side Hustle Income?
| Included | Not Included | |----------|--------------| | Freelance work | Employment income (PAYE) | | Selling products you make | Selling personal items (occasional) | | Tutoring or coaching | Rental income (separate £1,000 allowance) | | Gig economy work | Investment income | | Online services | Gifts |
Using the Allowance
If income is under £1,000:
- No need to register for Self Assessment
- No need to report to HMRC
- Tax-free—keep any profit
If income is over £1,000:
- Register for Self Assessment
- Choose: deduct £1,000 OR claim actual expenses
- Pay tax on the remainder
Learn more: Trading Allowance Explained
Side Hustle Plus Day Job
Most side hustlers have employment income too. Here's how the tax works together:
How It's Combined
| Source | Treatment | |--------|-----------| | Day job salary | Taxed via PAYE (employer deducts) | | Side hustle profit | Added to salary, taxed via Self Assessment |
Your side hustle profit is added on top of employment income.
Tax Rate on Side Hustle
Your side hustle is taxed at your marginal rate:
| Your Total Income | Side Hustle Tax Rate | |-------------------|---------------------| | Under £12,570 | 0% | | £12,571 – £50,270 | 20% | | £50,271 – £125,140 | 40% | | Over £125,140 | 45% |
Example:
| Income Source | Amount | |---------------|--------| | Day job salary | £38,000 | | Side hustle profit | £8,000 | | Total | £46,000 |
Your salary uses your Personal Allowance (£12,570) and part of the basic rate band. Your side hustle is taxed entirely at 20% (you're still in basic rate).
Higher earner example:
| Income Source | Amount | |---------------|--------| | Day job salary | £48,000 | | Side hustle profit | £6,000 | | Total | £54,000 |
- Basic rate band ends at £50,270
- First £2,270 of side hustle at 20% = £454
- Remaining £3,730 at 40% = £1,492
- Tax on side hustle: £1,946
When to Register
Register If:
- Side hustle income exceeds £1,000, OR
- You want to claim expenses (even if under £1,000), OR
- You have a loss you want to offset
Don't Need to Register If:
- Income is £1,000 or less, AND
- You're happy using the Trading Allowance (no expense claims)
How to Register
- Go to gov.uk/register-for-self-assessment
- Select "Self-employed or sole trader"
- Describe your side hustle
- Receive your UTR in 10 working days
Deadline: Register by 5 October following the tax year.
Side Hustle Expenses
If your income exceeds £1,000, you can claim expenses to reduce taxable profit.
Common Side Hustle Expenses
| Expense | Examples | |---------|----------| | Equipment | Laptop, camera, tools | | Software | Apps, subscriptions | | Materials | Supplies for products you make | | Marketing | Website, ads, business cards | | Phone | Business portion of contract | | Home office | Simplified expenses (£10-26/month) | | Travel | To clients or for business | | Fees | Platform fees (Etsy, eBay, etc.) |
Allowance vs Expenses
Compare both methods:
Example: Etsy Seller
| Item | Amount | |------|--------| | Income | £3,500 | | Materials | £800 | | Etsy fees | £400 | | Packaging/postage | £300 | | Total expenses | £1,500 |
Option A (Trading Allowance): £3,500 − £1,000 = £2,500 taxable
Option B (Actual Expenses): £3,500 − £1,500 = £2,000 taxable
Best choice: Actual expenses (saves £100 in taxable income)
Learn more: Sole Trader Expenses Guide
Types of Side Hustles
Freelancing
Writing, design, development, consulting, photography:
| Tax Aspect | Treatment | |------------|-----------| | Income | All fees and payments | | Expenses | Equipment, software, home office | | Records | Invoices and receipts |
Selling Online
Etsy, eBay, Vinted, Depop:
| Situation | Tax Treatment | |-----------|---------------| | Selling personal items occasionally | Not taxable | | Buying to resell for profit | Trading income | | Selling items you create | Trading income |
Key question: Are you trading with intent to profit? If yes, it's taxable.
Platform reporting: From 2024, platforms report seller income to HMRC.
Tutoring and Coaching
Private lessons, online courses:
| Tax Aspect | Treatment | |------------|-----------| | Income | All fees charged | | Expenses | Teaching materials, software | | Records | Lesson logs, payments |
Delivery and Gig Work
Deliveroo, Uber Eats, TaskRabbit:
| Tax Aspect | Treatment | |------------|-----------| | Income | All payments from platform | | Expenses | Vehicle costs, phone, equipment | | Records | Platform statements, mileage |
Learn more: Uber Guide | Deliveroo Guide
Content Creation
YouTube, TikTok, blogging:
| Income Type | Taxable? | |-------------|----------| | Ad revenue | Yes | | Sponsorships | Yes | | Affiliate income | Yes | | Product sales | Yes | | Tips/donations | Yes |
Expenses: Equipment, software, props, travel for content.
Calculating Side Hustle Tax
Step 1: Calculate Profit
Profit = Income − Expenses (or Income − £1,000 allowance)
Step 2: Add to Employment Income
Total income = Salary + Side hustle profit
Step 3: Calculate Additional Tax
Tax on side hustle at your marginal rate, plus National Insurance if total self-employment profit exceeds thresholds.
Example Calculation
Emma: Marketing Manager with Etsy Shop
| Item | Amount | |------|--------| | Day job salary | £42,000 | | Etsy sales | £8,500 | | Etsy expenses | £3,200 | | Side hustle profit | £5,300 | | Total income | £47,300 |
Tax on Side Hustle:
| Tax | Calculation | Amount | |-----|-------------|--------| | Income Tax | £5,300 × 20% | £1,060 | | Class 2 NI | £3.45 × 52 | £179 | | Class 4 NI | 6% × £5,300 | £318 | | Total | | £1,557 |
Emma's side hustle costs £1,557 in tax—leaving her £3,743 extra income.
National Insurance on Side Hustles
Self-employment NI applies to side hustle profit:
| Type | Rate | Threshold | |------|------|-----------| | Class 2 | £3.45/week | Profits over £6,725 | | Class 4 | 6% | £12,570 – £50,270 | | Class 4 | 2% | Over £50,270 |
Note: Class 4 NI only applies to the self-employment portion, not your employment salary (which has its own NI via PAYE).
Filing Your Tax Return
What to Include
| Section | Information | |---------|-------------| | Employment (if applicable) | P60 details (pre-filled by HMRC) | | Self-employment (SA103) | Side hustle income and expenses |
Deadline
31 January following the tax year.
For 2024/25 (April 2024 – April 2025): file by 31 January 2026.
Payment
Pay any tax owed by 31 January.
If tax bill exceeds £1,000, you'll also make payments on account for next year.
Record Keeping
Even for a small side hustle, keep records:
| Record | Keep For | |--------|----------| | Income evidence | Bank statements, platform payouts | | Expense receipts | All business purchases | | Mileage log | If claiming travel |
Keep for 6 years after the tax year.
Common Side Hustle Mistakes
1. Not Tracking Income
If you receive money through multiple channels (PayPal, bank transfers, cash), track it all.
2. Missing Expenses
Review what you can claim. Many side hustlers under-claim.
3. Forgetting Platform Fees
If eBay, Etsy, or other platforms take fees, claim them as expenses.
4. Confusing Hobby vs Business
If you intend to make profit and work at it regularly, it's a business—even if you enjoy it.
5. Missing Registration Deadline
If income exceeds £1,000, register by 5 October. Late registration can cause problems.
Side Hustle Tax Tips
1. Track From Day One
Even if you're unsure if you'll hit £1,000, track income and expenses from the start.
2. Open a Separate Bank Account
Makes tracking business transactions much easier.
3. Set Money Aside
Keep 25-30% of profits for tax. Don't spend it all.
4. Claim Everything Legitimate
Understand allowable expenses. Every pound reduces taxable profit.
5. Consider Timing
If you're close to a tax band threshold, timing income or expenses around 5 April can help.
Making Tax Digital
From April 2026 (income over £50,000) or April 2027 (over £30,000), Making Tax Digital applies.
If your combined self-employment and property income exceeds these thresholds, MTD applies—even if it's a side hustle.
Most side hustlers won't hit these limits, but be aware if your income grows.
Track Side Hustle Income with TaxFolio
TaxFolio makes side hustle tax simple:
- Bank connection — import sales and expenses automatically
- Expense tracking — categorise business costs
- Platform support — works with Etsy, eBay, PayPal
- Combined view — see employment + side hustle together
- Real-time tax estimate — know what you'll owe
- Self Assessment filing — submit directly to HMRC
- From £69.99/year — affordable for side hustlers
Start your free 30-day trial and get your side hustle tax sorted.
Summary: Side Hustle Tax Checklist
| Income Level | Action Required | |--------------|-----------------| | Under £1,000 | Nothing—Trading Allowance covers it | | £1,000 – £2,000 | Register, file return, compare allowance vs expenses | | Over £2,000 | Register, file return, likely claim expenses |
Key steps:
- [ ] Track all side hustle income
- [ ] Keep expense receipts
- [ ] Register for Self Assessment if over £1,000
- [ ] Calculate: Trading Allowance vs actual expenses
- [ ] File by 31 January
- [ ] Pay tax owed by 31 January
- [ ] Keep records for 6 years