Do I Pay Tax on My Side Hustle in the UK? (2026/27)

Yes — if your gross side hustle income exceeds £1,000 per tax year, you typically need to pay tax. Below £1,000 the trading allowance covers it and you don’t need to register or declare anything. Above £1,000, you must register for Self Assessment and pay income tax (at your marginal rate, often 20% or 40%) plus Class 4 NI (6% / 2%) on the taxable profit. Your full-time salary uses your personal allowance first; the side hustle income is added on top.

This is what UK side hustlers actually need to do for 2026/27.

What counts as a side hustle for tax

HMRC treats most income-generating activities outside your main employment as “self-employed” or “trading” income, including:

• Freelance work (writing, design, consulting, IT contracting).
• Selling on online platforms (Etsy, Depop, eBay if it’s “trading” rather than selling personal items).
• Tutoring or coaching.
• Driving / delivery work (Uber, Deliveroo, Amazon Flex).
• Letting through Airbnb or holiday lettings.
• Selling crafts or services.
• YouTube / social media monetisation.
• Royalties or licensing income.

Note: selling personal possessions you no longer want (clearing your wardrobe via Vinted, for example) is usually NOT trading — see our Vinted tax guide for the line.

The £1,000 trading allowance

The trading allowance is a tax-free amount HMRC gives for casual self-employment or side hustle income.

For 2026/27:

• First £1,000 of gross self-employed / casual income per tax year is completely tax-free.
• If your gross income is £1,000 or below, you don’t need to register for Self Assessment or pay any tax.
• If your gross income is above £1,000, you must register and either:
  • Claim the £1,000 trading allowance instead of expenses (use it for whichever is more favorable), or
  • Claim actual allowable business expenses.

HMRC trading allowance guidance.

A worked example:

• Side hustle income: £3,500 in 2026/27.
• Allowable expenses: £400.
• Option A: Claim expenses. Taxable profit: £3,500 − £400 = £3,100.
• Option B: Claim trading allowance. Taxable profit: £3,500 − £1,000 = £2,500.

Choose the higher deduction (trading allowance in this case). The £2,500 of taxable profit is then added to your other taxable income for the year.

How the tax is calculated

Side hustle income is added to your full-time salary for the purpose of income tax calculation.

A worked example:

• Full-time salary: £40,000.
• Side hustle profit (after expenses or trading allowance): £5,000.
• Combined income: £45,000.

UK 2026/27 income tax bands (England, Wales, NI):

• Personal allowance: £12,570 (used by salary).
• Basic rate (20%): £12,570–£50,270 (covers salary £12,570–£40,000 = £27,430 worth of tax-band, plus side hustle £5,000 = £32,430).
• Tax on side hustle income (basic rate): £5,000 × 20% = £1,000.

If the same person earned £60,000 PAYE plus £5,000 side hustle:

• Combined: £65,000.
• Side hustle income falls into the higher-rate band.
• Tax on side hustle: £5,000 × 40% = £2,000.

The marginal rate matters significantly.

Class 4 National Insurance on side hustle

Self-employed people also pay Class 4 NI on their net profit (separately from any NI you pay on your PAYE salary):

• 6% on net profit between £12,570 and £50,270.
• 2% on net profit above £50,270.

Important: Class 4 NI is calculated on the self-employed profit alone, not combined with PAYE earnings. So:

• Self-employed profit £15,000.
• Class 4 NI = (£15,000 − £12,570) × 6% = £146.

If your self-employed profit is below £12,570, no Class 4 NI is due.

Class 2 NI — abolished for most

Class 2 NI (a flat weekly amount) was abolished for most self-employed people from April 2024. Voluntary Class 2 contributions remain available to fill State Pension gaps.

For most side hustlers, Class 2 is no longer a concern.

Self Assessment registration

If your side hustle income exceeds £1,000 (gross), you need to register for Self Assessment with HMRC.

The process:

1. Register by 5 October following the tax year in which you first exceed £1,000.
2. HMRC issues a Unique Taxpayer Reference (UTR) within a few weeks.
3. File Self Assessment return online by 31 January following the tax year end.
4. Pay any tax due by 31 January.

For 2026/27 income, the deadline is 31 January 2029.

Late registration or late filing triggers automatic penalties — starting at £100 for late filing.

Payments on Account

If your Self Assessment tax bill exceeds £1,000 (and certain other conditions), HMRC requires payments on account for the following year:

• First payment on account: 50% of last year’s tax bill, due 31 January alongside the balancing payment for the previous year.
• Second payment on account: 50% of last year’s tax bill, due 31 July.
• Balancing payment: any difference between estimated payments and actual tax due, with the next return.

For someone with a first-year side hustle tax bill of £2,000:

• January 2027: pay £2,000 (the 2026/27 tax bill) + £1,000 (first payment on account for 2026/27) = £3,000.
• July 2027: pay £1,000 (second payment on account).
• January 2028: any balancing payment for 2026/27.

The cash-flow shock of the first year — paying 18 months of tax in one go — catches many new side hustlers off guard. Budget for it.

Common side hustle tax pitfalls

A few things that trip up side hustlers:

1. Not registering when they should

If your gross income exceeded £1,000, you must register — even if you made a loss. Failure to register attracts penalties.

2. Not accounting for the PAYE interaction

PAYE deductions assume your salary is your only income. Side hustle income pushes you into higher tax bands without being deducted at source. You owe the tax via Self Assessment.

3. Confusing personal sales with trading

Selling old clothes on Vinted is usually not trading. Buying clothes specifically to resell is. The distinction matters for tax.

4. Not separating personal and business expenses

Without separate bank accounts and records, it’s hard to justify expense claims to HMRC. Set up a separate business account from day one if you’re serious about the side hustle.

5. Underestimating Class 4 NI

Many side hustlers focus only on income tax and forget Class 4. The 6% NI on top of 20% income tax is a 26% effective rate on side hustle profit — significant.

Worked example: full-time + side hustle

Maria earns £45,000 from her full-time job. She has a side photography business generating £8,000 gross income with £1,200 of expenses in 2026/27.

Step 1: Calculate taxable side hustle profit.

Option A: Claim expenses: £8,000 − £1,200 = £6,800. Option B: Claim trading allowance: £8,000 − £1,000 = £7,000.

Option B is more favorable. Taxable profit: £6,800.

Wait — actually Option A: £8,000 − £1,200 = £6,800; Option B: £8,000 − £1,000 = £7,000. Lower is better. Option A wins (£6,800 vs £7,000).

Step 2: Income tax on side hustle profit.

Maria’s combined income: £45,000 + £6,800 = £51,800.

Of the £6,800:

• £45,000 to £50,270 = £5,270 in basic rate (20%) = £1,054.
• £50,270 to £51,800 = £1,530 in higher rate (40%) = £612.

Total income tax on side hustle: £1,666.

Step 3: Class 4 NI on side hustle profit.

£6,800 in the 6% NI band (above £12,570 — applied to SE profit alone).

• Class 4 NI: £6,800 × 6% = £408.

Wait, that’s wrong. Class 4 NI is calculated on SE profit, but only on profit ABOVE the primary threshold (£12,570). Since her SE profit (£6,800) is below £12,570, no Class 4 NI is due.

Actually rechecking: Class 4 NI applies on SE profit between £12,570 and £50,270 at 6%. If her SE profit is £6,800, that’s below £12,570, so no Class 4 NI.

Total tax on side hustle: ~£1,666 (income tax only).

Effective rate: 24.5% of side hustle profit. Net income from side hustle: £6,800 - £1,666 = £5,134.

Internal links

• What is the trading allowance and how does it work?
• Do I need to register as self employed for a side hustle?
• How do I file a self assessment tax return for the first time?

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This guide is information, not regulated financial advice. Tax rules can change between budgets — confirm on gov.uk before acting.