Side Hustle Tax Calculator

More people than ever earn money on the side - from selling online, freelancing, tutoring, content, or renting things out. The side hustle tax calculator above shows how much tax you owe on that extra income. This guide explains when you have to tell HMRC, how the £1,000 trading allowance works, and how side income is taxed on top of your main job.

The £1,000 trading allowance

The single most important rule for side hustles is the trading allowance: you can earn up to £1,000 of gross trading or miscellaneous income in a tax year without paying tax on it or even needing to tell HMRC. This is gross income (total received), not profit. If your side hustle brings in £1,000 or less in the year, you generally have nothing to report. If it brings in more, you may need to register for Self Assessment and declare it.

When you must declare side income

You typically need to register for Self Assessment and report your side hustle if your gross trading income exceeds £1,000 in the tax year. You report the income, deduct either your actual allowable expenses or the £1,000 trading allowance (whichever is better for you - you cannot use both), and pay tax on the resulting profit. The deadline to register is 5 October after the end of the tax year in which you crossed the threshold, with the return and payment due the following 31 January.

How side hustle income is taxed

Side hustle profit is added on top of your existing income, so it is taxed at your marginal rate. If your job already uses your £12,570 personal allowance, every pound of side-hustle profit is taxed from your current band upward - 20% if you are a basic-rate taxpayer, or 40% if the extra income tips you into the higher-rate band. You may also pay Class 4 National Insurance on self-employment profits above the threshold. Because the side income stacks on your salary, the tax can be higher than people expect.

Worked example - a basic-rate employee

Suppose you earn £30,000 in a job and make £4,000 gross from a side hustle, with £600 of expenses. You can deduct either the £600 actual expenses or the £1,000 trading allowance - the allowance is better here, leaving £3,000 of taxable profit. As a basic-rate taxpayer that is taxed at 20% (£600), plus Class 4 National Insurance at 6% on the part above the threshold. You keep most of it, but it is worth setting aside roughly a quarter to a third of side-hustle profit for tax.

Worked example - a side hustle that tips you into higher rate

Now suppose you earn £48,000 and make £6,000 of side-hustle profit. Part of that profit fills the remaining basic-rate band up to £50,270 and is taxed at 20%; the rest falls into the higher-rate band at 40%. So a successful side hustle can be taxed more heavily than your day job once it pushes you over £50,270. Pension contributions can help by keeping more of your total income in the basic-rate band.

Common side hustles and the rules

• Selling online - selling your own unwanted possessions is usually not taxable, but buying or making things to sell for profit is trading and counts toward the £1,000 allowance.
• Freelancing and services - design, tutoring, consulting and similar are trading income.
• Content and creators - ad, sponsorship and platform income is taxable trading income.
• Renting out property or a room - has its own rules and the separate Rent a Room scheme, not the trading allowance.

Note that online platforms now report seller information to HMRC, so it is more important than ever to keep your own records and declare income above the allowance.

How to stay on the right side of HMRC

• Keep records of all income and expenses from day one - a simple spreadsheet is enough.
• Set aside tax as you earn, roughly 20–30% of profit for most basic-rate taxpayers, more if you are higher rate.
• Register on time if you cross £1,000, to avoid penalties.
• Claim the better of the £1,000 trading allowance or your actual expenses.

Allowable expenses versus the trading allowance

When your side hustle earns more than £1,000, you choose between two ways to work out your taxable profit, and you should pick whichever leaves you paying less. The first is the £1,000 trading allowance: you simply deduct £1,000 from your gross income, with no need to track receipts. The second is actual expenses: you deduct the genuine costs of running your side hustle - materials, stock, equipment, software, a proportion of phone and internet, mileage, platform and payment fees, and so on. If your real expenses are less than £1,000, use the allowance; if they are more, claim the actual expenses. You cannot use both on the same income, so it pays to add up your costs and compare. Keeping receipts and a simple record from the start makes this choice easy at tax time.

National Insurance on side income

Income tax is not the only consideration. If your side hustle is self-employment and your profits exceed the threshold, you may also pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above that. Because your employment already uses your personal allowance, side-hustle profit can attract Class 4 NI from the first pound of profit once your total self-employment profit passes the threshold. Class 2 contributions are generally no longer payable, but profits above the Small Profits Threshold still earn a National Insurance credit toward your State Pension. The calculator above factors National Insurance into the figures so you see the true cost, not just income tax.

When your side hustle becomes your main income

Many businesses start as a side hustle. As yours grows, a few thresholds become relevant. If your turnover approaches the VAT registration threshold, you may need to register for VAT. If your combined self-employment and property income passes the Making Tax Digital thresholds, you will move to quarterly digital reporting. And as profits rise, more of your income may fall into the higher-rate band, making pension contributions and careful record-keeping more valuable. Treating your side hustle like a real business from early on - separate records, money set aside for tax, and an eye on these thresholds - makes the transition smooth if it does become your main source of income.

Keeping good records from day one

The single habit that makes side-hustle tax painless is keeping records as you go. From your very first sale, note the date, what you received, and any costs - a simple spreadsheet or a free bookkeeping app is plenty. Save digital copies of receipts for anything you might claim as an expense, and ideally keep your side-hustle money in a separate account so business and personal transactions do not get tangled. Good records mean that when you cross the £1,000 threshold and need to report, you can quickly see your income, choose between the trading allowance and actual expenses, and file an accurate return without a stressful scramble through old emails and bank statements.

It is also wise to set money aside for tax as you earn, rather than facing a single bill in January. A reasonable rule of thumb is to put away around a quarter of your profit if you are a basic-rate taxpayer, and closer to a third or more if your side income tips you into the higher-rate band, to cover both income tax and National Insurance. Treating tax as money that was never really yours to spend avoids the most common side-hustle mistake - spending all the income and then being caught short when the bill arrives. With records in place and tax set aside, a growing side hustle stays a pleasure rather than becoming a worry. And if your records ever show your income approaching the £1,000 allowance, that is your cue to check whether you now need to register for Self Assessment, so you stay ahead of HMRC rather than catching up later.

Check your numbers

To see the full effect of side income on your tax, use our self-employed tax calculator, and check how the bands apply to your combined income with the income tax calculator. If your side hustle grows, our Making Tax Digital checker shows whether the new digital reporting rules will apply to you.

Key takeaways

• You can earn up to £1,000 gross from a side hustle tax-free under the trading allowance.
• Above £1,000, you usually must register for Self Assessment and declare the income.
• Side-hustle profit is taxed on top of your salary at your marginal rate, plus possible Class 4 NI.
• Claim the better of the £1,000 allowance or your actual expenses - not both.
• Online platforms now report sellers to HMRC, so keep records and declare income over the allowance.

This calculator and guide give general information for the 2026/27 tax year, not personal tax advice. Check your own circumstances or speak to HMRC or an adviser if you are unsure.

Related tools

• Do I need to file a tax return?, find out if you need to register.

Who should use this calculator

For anyone earning on the side alongside a job — selling online, freelancing, renting something out. The first thing to establish is whether you owe anything at all: the £1,000 trading allowance means small amounts of extra income need not be reported.

Above that, the side income is added on top of your salary and taxed at your marginal rate, which is why it feels heavily taxed — there is no second Personal Allowance. You also choose between deducting the £1,000 allowance or your actual expenses, whichever gives the better result.

What this calculator assumes

• The £1,000 trading allowance removes the need to report income below it.
• Side income is stacked on top of employment income and taxed at your marginal rate.
• You may deduct either the trading allowance or actual expenses, not both.
• Class 4 National Insurance applies to self-employed profit above the threshold.

Limitations — what it does not cover

• Online platform reporting. Marketplaces now report seller data to HMRC, so undeclared income is far more visible than it was.
• Selling personal possessions, which is not trading — clearing your wardrobe is not a side hustle, though high-value items can raise CGT.
• Registration deadlines — 5 October following the tax year in which you started.
• Payments on account, once the bill passes the threshold.
• The property allowance, a separate £1,000 for rental income.
• Whether your employment contract permits outside work.