Paying tax on a side hustle

The first question is whether you are trading at all. HMRC's guidance on selling online says you are unlikely to pay tax if you sell personal items from your home, like the contents of a loft or garage. If you buy or make goods to sell at a profit, though, you are likely to be trading and will have to pay tax on your profits. HMRC adds that items you make, including as a hobby, can count too.

Services count too. HMRC's information sheet describes services as things you do for others, such as tutoring, cleaning or dog walking, and that income goes towards the same £1,000 trading allowance, even if you only do it at weekends.

Digital platform reporting rules began on 1 January 2024. Under them, platforms collect your details and your income from selling goods or services on their platform yearly and send it to HMRC by the following January; information for 2024 was reported by 31 January 2025. GOV.UK says platforms do not report you if you make fewer than 30 sales of goods in a calendar year and receive less than 2,000 euros, about £1,700, for those sales.

Being reported does not by itself mean you owe tax, and not being reported does not mean you are exempt. The rules for whether you pay are the ordinary ones described here.

The trading allowance means the first £1,000 a year of gross trading income is tax free, and if your total is no more than that you do not need to tell HMRC. Once it goes over £1,000, you need to register for self assessment by 5 October after the end of the tax year, and you then choose between deducting the £1,000 allowance or your actual expenses. Our guide to the £1,000 trading allowance explains that choice, and how to register for self assessment covers the forms.

The government has announced a rise in the trading allowance to £3,000 from 6 April 2027. That is not yet law.

Side hustle profit is not taxed separately. It is added to your salary and any other income, and income tax is charged across the bands in the usual way. Your employer will normally have used your Personal Allowance of £12,570 against your wages, so profit from the side business is often taxed at 20%, or 40% if your total income takes you past the basic rate band. Our guide to income tax rates and bands has the full table.

National Insurance is calculated on your self-employed profits on their own. Class 4 is payable if your profits are more than £12,570 a year, at 6% up to £50,270 and 2% above. If your profits are above the small profits threshold of £7,105, Class 2 is treated as paid to protect your National Insurance record, with nothing to pay.

Because you already pay tax through PAYE, you may be able to have a side hustle bill collected through your tax code instead of paying it in one go. GOV.UK says this works if you owe less than £3,000 and submit your online return by 30 December, though not if you do not have enough PAYE income for HMRC to collect it. Otherwise the tax is due by 31 January, and once your self assessment bill reaches £1,000 you may also have to start making payments on account.

Making Tax Digital for Income Tax uses gross income from self-employment and property, not your salary, to decide who must join. The confirmed thresholds are more than £50,000 from April 2026, more than £30,000 from April 2027 and more than £20,000 from April 2028, so a small side business alongside a job will often stay below them for now.

Keeping a simple record of every sale and every cost from the first day makes the year end much easier, whichever way you end up claiming. Bear in mind this guide is general information, not tax advice. If your side income is growing and you would like help, our sole trader accountants page explains what is available, and how it works explains what happens to an enquiry: we read each one and, where we can, put you in touch with a local accountant.