How tax works on a side hustle in the UK (2026/27)
When HMRC needs to know about your side income, how the £1,000 trading allowance works, what you actually pay, and the dates that matter.
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What counts as a side hustle
HMRC calls it trading income. If you are selling things you made or bought to resell, offering a service, or doing paid gigs outside your job, it counts. Freelance design, dog walking, reselling trainers, tutoring and delivery driving all count.
Selling your own unwanted stuff is different. Clearing out your wardrobe on Vinted is not trading, and you do not pay income tax on it, however many items you sell. It becomes trading when you are buying to sell, or making things to sell.
The £1,000 trading allowance
Everyone gets a £1,000 trading allowance each tax year. If your total side income, before any costs, is £1,000 or less, it is tax free and you do not need to report it.
If you earn more than £1,000, you choose between:
- The trading allowance: knock £1,000 off your income and pay tax on the rest.
- Your real expenses: knock off what you actually spent running the side hustle.
You cannot use both. If your costs are under £1,000, the allowance usually wins.
From 6 April 2027 the trading allowance triples to £3,000. The October 2026 Budget also raised the point at which you need to tell HMRC to £3,000. So from the 2027/28 tax year, side income up to £3,000 is tax free and does not need reporting.
What you pay
Your profit is added to your other income for the year.
| Tax | Rate in 2026/27 | Applies to |
|---|---|---|
| Income tax, basic rate | 20% | Income up to £50,270 |
| Income tax, higher rate | 40% | Income from £50,271 to £125,140 |
| Class 4 National Insurance | 6% | Side profit between £12,570 and £50,270 |
| Class 4 National Insurance | 2% | Side profit above £50,270 |
Two things catch people out. First, your job usually uses up your £12,570 personal allowance, so your side profit is taxed from the first pound. Second, if your salary is close to £50,270, some of your side profit will be taxed at 40%.
National Insurance is different. It is worked out on your side profit alone, so most side hustles under £12,570 profit pay none.
Free toolSide hustle tax calculatorSee how much tax and National Insurance you owe on side income, and what to set aside each month.The dates that matter
The key dates if you start a side hustle in the 2026/27 tax year (6 April 2026 to 5 April 2027):
- 31 January 2027: file and pay for the 2025/26 tax year if you already have side income.
- 5 October 2027: register for Self Assessment if this is your first year over £1,000.
- 31 January 2028: file your online return and pay what you owe.
If your bill is over £1,000, HMRC may also ask for payments on account towards the next year. In your first year that can mean paying about one and a half times your bill in January, so it pays to set money aside monthly.
Making Tax Digital
If your self-employed income and any rental income together go over £30,000 in 2025/26, you will need to use Making Tax Digital from 6 April 2027. That means keeping records in compatible software and sending HMRC quarterly updates. The threshold drops to £20,000 a year later.
Free toolMaking Tax Digital checkerFind out if and when you need MTD software and quarterly updates for your side income or rent.A simple routine that works
- Open a separate bank account just for side hustle money.
- Every time you get paid, move about 20% (or 40% if you are a higher rate taxpayer) into a savings pot.
- Keep receipts and a simple spreadsheet of income and costs.
- Check your numbers each quarter with the calculator, so January holds no surprises.
This guide covers England, Wales and Northern Ireland. Scotland has different income tax bands. For HMRC's own guidance, see tax-free allowances on trading income and working for yourself.
This is general information, not personal tax or financial advice. Tax rules change and depend on your circumstances, so check GOV.UK or speak to an accountant before acting.