UK Side Hustle Complete Guide 2026/27: How to Start + Tax Rules
UK side hustle tax 2026/27: the £1,000 trading allowance, when to register for Self Assessment, how Income Tax and Class 4 NI apply, payments on account.
The short version
- £1,000 trading allowance: gross trading income at or below it usually does not need to be declared.
- Above it: register for Self Assessment by 5 October after the tax year ends (5 October 2027 for 2026/27).
- Income Tax on the profit at your marginal rate, because it is added to your salary.
- Class 4 NI only on profit above £12,570, whatever your salary.
- Platforms report seller income to HMRC for each calendar year from 2024.
Income Tax figures use the England, Wales and Northern Ireland rates; Scotland has its own bands. Class 4 NI and the allowances are UK-wide.
Common side hustles and how they are taxed
Services: tutoring, freelancing, pet care, consulting
Trading income. Covered by the £1,000 trading allowance if gross income is £1,000 or less; otherwise Self Assessment.
Making or buying goods to sell
Trading income if you make or buy goods to sell at a profit. Register for VAT if taxable turnover goes over the threshold.
Selling your own unwanted items
Not usually trading. HMRC says you are unlikely to pay tax selling personal items such as the contents of a loft; Capital Gains Tax can apply to valuable items.
Delivery or driving through an app
Usually self-employed trading income. Platforms report seller income to HMRC.
Hiring out personal equipment
Covered by the trading allowance (for example, power tools).
Letting a furnished room in your own home
Rent a Room Scheme: up to £7,500 a year tax-free (half if the income is shared). The property allowance cannot be used on the same income.
Letting other property or a parking space
Property income, with its own £1,000 property allowance.
Sources: trading and property allowances, Rent a Room Scheme, selling on a digital platform. VAT registration is required once taxable turnover goes over £90,000 in 12 months (GOV.UK).
The trading allowance
- Up to £1,000 a tax year, from 6 April 2017, across all your trades combined.
- Gross trading income of £1,000 or less: you usually do not need to tell HMRC, but you must keep records.
- More than £1,000: deduct the allowance instead of actual expenses, or claim actual expenses if they are higher. You cannot use both.
- A separate £1,000 property allowance covers property income. It cannot be used on income under the Rent a Room Scheme.
How side hustle tax works alongside a salary (2026/27)
Income Tax on the profit depends on where your total income lands: 20% up to £50,270, 40% above that, an effective 60% between £100,000 and £125,140 while the Personal Allowance is withdrawn, and 45% above £125,140. Class 4 NI is separate and depends only on the profit: 6% between £12,570 and £50,270, 2% above. Class 2 NI no longer has to be paid: with profits of £7,105 or more it is treated as paid to protect your National Insurance record, and below that you can choose to pay it voluntarily (per GOV.UK).
| Salary | Side profit | Extra Income Tax | Class 4 NI | You keep |
|---|---|---|---|---|
| £30,000 | £5,000 | £1,000 | £0 | £4,000 |
| £30,000 | £15,000 | £3,000 | £146 | £11,854 |
| £60,000 | £20,000 | £8,000 | £446 | £11,554 |
Profit means after expenses or the trading allowance. Assumes a standard tax code and no other income.
Registering and filing
- Register for Self Assessment by 5 October after the tax year ends (GOV.UK).
- Paper return: 31 October after the tax year ends.
- Online return and payment: 31 January after the tax year ends.
- Payments on account, where due: 31 January and 31 July.
Payments on account: the first-year bill
If your Self Assessment bill is £1,000 or more, HMRC usually asks for two payments on account towards the next year, each half of this year's bill (Class 4 NI included). They are not due if more than 80% of your tax was already collected another way, such as through your tax code (GOV.UK).
Example: salary £30,000 and side profit £15,000 in 2026/27. The Self Assessment bill is £3,146 (Income Tax £3,000 plus Class 4 NI £146). PAYE collects only 53% of the year's total, so payments on account apply. By 31 January 2028 you pay the £3,146 plus a first payment on account of £1,573, then a second £1,573 by 31 July 2028.
Online platforms reporting to HMRC
From 1 January 2024, UK digital platforms collect details of people selling goods or services through them, and send HMRC each calendar year's income by the following 31 January. Sellers of goods with fewer than 30 sales and less than 2,000 euros (about £1,700) in the year are not reported. A platform report does not mean you owe tax: selling personal items from your home is unlikely to be taxable, but buying or making goods to sell at a profit is likely to be trading (GOV.UK).
When to think about a limited company
There is no fixed profit at which a company becomes better. Things that matter: how much profit you would leave in the company, whether you need limited liability, and the cost of company accounts and filings. Use the salary vs dividend calculator to compare your own figures.
Related pages
Frequently asked questions
What is the trading allowance?
A tax exemption of up to £1,000 a year on gross trading income. If your gross trading income from all your trades is £1,000 or less, you usually do not need to tell HMRC. Above that, you can deduct the £1,000 allowance instead of your actual expenses, or claim actual expenses if they are higher. It does not apply to partnership income.
Do I need to tell HMRC about my side hustle?
If your gross trading income is over £1,000 in a tax year, register for Self Assessment. Register by 5 October after the end of the tax year - for 2026/27 income that is 5 October 2027. Telling HMRC late can bring a penalty.
How much tax will I pay on side hustle income?
Income Tax: the profit is added to your salary, so it is taxed at your marginal rate (20%, 40% or 45%, with an effective 60% between £100,000 and £125,140 as the Personal Allowance is withdrawn). Class 4 NI is worked out on the profit alone: nothing up to £12,570, 6% up to £50,270, 2% above. So a small side profit usually pays Income Tax but no Class 4 NI.
Should I set up a limited company for my side hustle?
There is no single profit level at which a company becomes worthwhile. A company pays Corporation Tax and you then pay tax on what you take out as salary or dividends, and it brings its own accounts, filing and costs. Model your own figures with our salary vs dividend calculator before deciding.
Can I claim expenses against side hustle income?
Yes, allowable business expenses reduce your taxable profit, or you can use the trading allowance instead. Sole traders can use simplified expenses: 55p a mile for the first 10,000 business miles in a car or van in 2026/27 (25p after), and £10, £18 or £26 a month for working at home 25-50, 51-100 or 101+ hours a month.
How does a side hustle affect Universal Credit?
If you are employed and self-employed, Universal Credit is worked out on your combined earnings, and the award falls by 55p for each £1 of net earnings (after tax and NI) above any work allowance. The minimum income floor, an assumed level of earnings, applies only if self-employment is your main work and you are treated as gainfully self-employed. A loss from self-employment is ignored, so only employment earnings count that month.
Do online platforms report my income to HMRC?
Yes. Since 1 January 2024, UK digital platforms collect seller details and report income each calendar year to HMRC by the following 31 January. Sellers of goods who make fewer than 30 sales and receive less than 2,000 euros (about £1,700) in the year are not reported. A report does not by itself mean you owe tax.
Does Making Tax Digital apply to my side hustle?
Making Tax Digital for Income Tax applies by qualifying income: gross self-employment and property income, not salary. It started from 6 April 2026 for qualifying income over £50,000 in 2024/25, extends from 6 April 2027 for over £30,000 in 2025/26, and from 6 April 2028 for over £20,000 in 2026/27.