Side Hustle Tax Calculator 2026/27: eBay, Vinted, Etsy, Freelance Income

Q Do I have to pay tax on a side hustle in 2026/27?

It depends on the amount. If your gross trading income is £1,000 or less, the trading allowance covers it and you do not need to tell HMRC. If it is more than £1,000, gov.uk says you must send a Self Assessment return: register by 5 October after the end of the tax year, file by 31 January, and pay any tax due. The test is on income before expenses, so £1,400 of sales with £500 of costs still crosses it. On the return you then deduct either the £1,000 allowance or your actual expenses, whichever is higher. Selling your own unwanted possessions is usually not trading at all (see below).

Q What is the £1,000 trading allowance and when can I use it?

A £1,000 tax-free allowance for trading income (ITTOIA 2005 Part 6A Chapter 1, from 2017/18). With gross trading income of £1,000 or less, all of it is covered (full relief). Above that, you can deduct the £1,000 instead of actual expenses (partial relief) - one or the other, not both. There is a separate £1,000 property allowance for property income. gov.uk says the trading allowance cannot be used for trading income from a partnership, or for income from a company or partnership that you or someone connected to you owns, controls or is a partner in, or from your or your spouse's employer.

Q When do I have to register for Self Assessment?

By 5 October after the end of the tax year, if you need to send a return and have not sent one before (or did not need to last year): for 2026/27, by 5 October 2027. gov.uk says you must send a return if you were a sole trader with income over £1,000, a partner in a partnership, had Capital Gains Tax to pay, or must pay the High Income Child Benefit Charge and do not pay it through PAYE; untaxed income such as rent, savings interest, dividends or foreign income may also mean you need one. HMRC usually posts your Unique Taxpayer Reference about 15 days after you register. Registering late can bring a failure-to-notify penalty based on the tax unpaid by 31 January.

Q What is the HMRC digital platform reporting rule?

The Platform Operators (Due Diligence and Reporting Requirements) Regulations 2023 (SI 2023/817), in force from 1 January 2024, require digital platforms that let users sell goods or services to collect information about sellers and report it to HMRC. gov.uk says platforms do not need to report a seller who received €2,000 or less (about £1,700) for fewer than 30 sales of goods in a year; that exception does not apply to services, transport rental or property rental. So 25 sales of goods totalling £1,500 would not be reported, but 35 sales would. The rules do not create a new tax or change the £1,000 trading allowance; they give HMRC data to check returns against.

Q Am I "trading" or just selling personal items?

HMRC weighs the "badges of trade" (BIM20205): profit-seeking motive, the number of transactions, the nature of the asset, similar trading transactions or interests, changes made to the asset, the way it was sold, the source of finance, the time between purchase and sale, and how the asset was acquired. Selling your own used clothes, books or furniture is usually not trading. Buying items in order to resell them, or making things to sell regularly, usually is. A personal item that sells for more than it cost may be within Capital Gains Tax instead; gains on most possessions (chattels) sold for £6,000 or less are exempt (TCGA 1992 s.262).

Q How is side hustle income stacked with my day job for tax?

Salary and side-hustle profit are added together for Income Tax, and the Personal Allowance and bands apply to the total. Example (2026/27, England): £45,000 salary plus £8,000 profit. The higher rate starts at £50,270, so £5,270 of the profit is taxed at 20% and £2,730 at 40%: £2,146 of Income Tax. Class 4 NI is worked out on the trading profit alone, and £8,000 is below the £12,570 Lower Profits Limit, so Class 4 is £0. Total £2,146, or 26.8% of the profit.

Q Do I pay National Insurance on side hustle income?

Class 4 NI is charged on self-employed profits at 6% between £12,570 and £50,270 and 2% above (2026/27). It is calculated on the trade's profit, separately from Class 1 on your salary, so profit of £12,570 or less pays none. If you also pay Class 1 on a salary, an annual maximum can limit your Class 4 (Social Security (Contributions) Regulations 2001, reg. 100). Class 2 is no longer charged: with profits of £7,105 or more you are treated as having paid it, and below that you can pay voluntarily at £3.65 a week to protect your State Pension record - which most employees already build through their salary.

Q What expenses can I deduct from my side hustle?

Costs incurred wholly and exclusively for the business (ITTOIA 2005 s.34). Common ones: stock bought to resell, platform and payment fees, postage and packaging, advertising, software and accountancy for the business, a share of phone and internet, training related to the business, and business mileage (55p a mile for the first 10,000 miles under simplified expenses). Working from home can be claimed at a simplified £10, £18 or £26 a month depending on hours, or as a share of actual costs. Not deductible: everyday clothing, ordinary commuting, fines, and entertaining clients. The trading allowance is an alternative to expenses, so compare the two each year and use the higher.

Q Should I incorporate my side hustle into a Limited Company?

There is no single profit level at which a company becomes worthwhile. A company pays Corporation Tax on its profits, and money you take out is taxed again as salary or dividends; it also brings extra costs and duties - annual accounts and a Corporation Tax return, a confirmation statement at Companies House, and payroll if you pay yourself a salary. Against that, a company gives limited liability and lets the company make employer pension contributions. Compare your own figures, and take advice before moving an existing business. See our Sole Trader vs Limited Company guide and optimum director salary 2026/27.

Q What if my side hustle is a loss?

A trading loss can be set against your other income, such as salary, for the same or previous tax year (ITA 2007 s.64). Example: £35,000 salary and a £2,000 loss (£4,000 income, £6,000 expenses) - taxable income falls to £33,000, saving £400 at 20%. Limits: the trade must be run on a commercial basis with a view to profit (s.66); losses from farming or market gardening are restricted after 5 years of losses (s.67); if you spend on average under 10 hours a week on the trade (a "non-active capacity"), sideways relief is capped at £25,000 a year (ss.74A and 74C); and most income tax reliefs set against general income are capped at the greater of £50,000 or 25% of adjusted total income (s.24A). Unused losses carry forward against later profits of the same trade (s.83).

Q How do I value items I buy and sell on eBay / Vinted?

If you buy items to resell, your cost of sales is what you paid for them, so keep the receipts. Profit is sales less the cost of goods sold and other business costs such as platform fees and postage. A simple spreadsheet works: date, item, cost, platform, sale date, sale price, fees, postage. If your taxable turnover goes over the £90,000 VAT registration threshold in a rolling 12-month period, you must register for VAT. Items you inherited or were given and then sell are not usually trading stock unless you are trading in them; see the badges of trade above.

Q When do I have to pay the side-hustle tax bill?

For the 2026/27 tax year (6 April 2026 to 5 April 2027): online return by 31 January 2028 (paper by 31 October 2027) and any tax owed by 31 January 2028. You also make payments on account unless your Self Assessment bill was under £1,000 or more than 80% of your tax was paid through PAYE (gov.uk). In your first year, 31 January 2028 brings the whole 2026/27 bill plus the first 2027/28 payment on account (half the bill); the second half is due 31 July 2028, and any balance on 31 January 2029. If you expect lower profits, you can apply to reduce payments on account (SA303); reducing them too far means paying interest on the shortfall.