In 2026/27 a side hustle is tax-free in the UK if your total income from it is £1,000 or less – the trading allowance covers it. Above £1,000 you register for Self Assessment by 5 October after the tax year, deduct either the £1,000 allowance or your real expenses, and pay income tax on the profit at your normal rate plus Class 4 National Insurance of 6% on profits above £12,570. This step-by-step guide shows how to work it out, with examples.
Is your side hustle “trading”?
Tax rules apply when you are trading – buying to resell, making things to sell, or selling a service such as tutoring, dog walking or freelance work. Selling your own unwanted belongings is usually not trading. For the bigger picture of which side hustles work, see the main guide to side hustles in the UK.
| Activity | Usually trading? |
|---|---|
| Clearing out your own clothes and furniture | No |
| Buying items cheaply to sell at a profit | Yes |
| Making and selling crafts | Yes |
| Tutoring, pet sitting, freelancing, delivery | Yes |
| Renting a furnished room in your home | Property income – Rent a Room rules, up to £7,500 tax-free |
How does the £1,000 trading allowance work?
- It is gross income, not profit. £1,000 of sales or fees in the tax year (6 April to 5 April), before costs.
- It covers all your side hustles together, not £1,000 each.
- Up to £1,000: no tax and normally no need to tell HMRC.
- Over £1,000: you can deduct the £1,000 allowance or your actual expenses – whichever is higher – but not both.
HMRC’s guidance is on GOV.UK – tax-free allowances on property and trading income.
How much tax would you pay? Worked examples
These examples assume a main job that already uses the £12,570 personal allowance, so side-hustle profit is taxed at the basic rate of 20% (in England, Wales and Northern Ireland; Scotland has its own rates).
| Side-hustle income | Expenses | Deduction used | Taxable profit | Income tax at 20% |
|---|---|---|---|---|
| £900 | £100 | Allowance covers it | £0 | £0, no return needed |
| £2,500 | £300 | £1,000 allowance | £1,500 | £300 |
| £6,000 | £2,200 | Actual expenses | £3,800 | £760 |
Class 4 National Insurance is charged at 6% only on total self-employed profits between £12,570 and £50,270 (2% above), so small side hustles alongside a job usually pay none. Compulsory Class 2 National Insurance was abolished in April 2024.
How do you register and file?
- Register for Self AssessmentBy 5 October after the end of the tax year in which you passed £1,000 – for 2026/27, by 5 October 2027 (GOV.UK – register).
- Keep records all yearIncome, receipts, mileage and bank statements; keep them for at least 5 years after the 31 January filing deadline.
- File your return onlineBy 31 January – for 2026/27, by 31 January 2028. Late returns get an automatic £100 penalty.
- Pay what you oweAlso by 31 January. If your bill is over £1,000, HMRC may ask for payments on account towards the next year.
Which expenses can you deduct?
- Materials and stock you buy to make or resell products.
- Platform and payment fees, postage and packaging.
- Travel for the business – mileage at HMRC’s simplified rates if you use your own vehicle.
- Equipment used for the business, such as a camera or software subscription.
- A share of home costs if you work from home, or HMRC’s flat-rate amounts based on hours worked at home.
What about platforms reporting to HMRC?
Online marketplaces and gig platforms report sellers with 30 or more sales or about £1,700 (€2,000) in a calendar year to HMRC, and send you a copy. This is information, not a tax bill: if you only sold your own unwanted things, you may owe nothing – keep a record of what you sold. If you are trading, make sure your income is declared.
Not tax advice: these are the general rules for 2026/27. For your own case, check GOV.UK, ask an accountant, or contact free help such as TaxAid. The government plans to raise the Self Assessment threshold for trading income to £3,000 by 2029, but this is not in force yet.
Questions about side hustle tax
Do I need to pay tax on a side hustle in the UK?
Only if your total side-hustle income is over £1,000 in the tax year. Then you register for Self Assessment and pay tax on the profit.
Is the £1,000 trading allowance per side hustle?
No. It covers all your trading income combined in one tax year.
Do I pay National Insurance on a side hustle?
Class 4 NI applies at 6% only on total self-employed profits above £12,570, so most small side hustles pay none.
What happens if I don’t declare side-hustle income?
HMRC can charge the tax owed plus interest and penalties, and platform reports make undeclared trading income easier to find.
More on this route: the main guide covers the whole topic – side hustles and tax.
