If you earn extra money from a side hustle alongside your main job, here is when you need to pay tax and what to do.
The £1,000 trading allowance is your first port of call. If your total side income (before expenses) is under £1,000 in a tax year, it is completely tax-free. You do not need to tell HMRC or file a tax return.
If your side income exceeds £1,000, you have two options. You can either deduct the £1,000 trading allowance from your income (no need to track expenses), or you can deduct your actual business expenses if they exceed £1,000. You cannot do both.
For example, if your side hustle earns £3,000 and you have £500 in expenses: using the trading allowance, your taxable profit is £2,000. Using actual expenses, your taxable profit is £2,500. The trading allowance is better in this case.
You must register for Self Assessment if your side income exceeds £1,000. Register by 5 October following the end of the tax year. For the 2025/26 tax year, the deadline is 5 October 2026.
Your side income is taxed on top of your employment income. If you already earn £35,000 from your job and make £5,000 from a side hustle, the side income is taxed at 20% basic rate plus 8% NI — giving you a 28% combined rate. If your total income pushes you above £50,270, the portion above that threshold is taxed at 42%.
How much to set aside: as a general rule, save 25-30% of your side income for tax. If you are close to the higher rate threshold, save 40-45%.
Common side hustles and their tax treatment: eBay selling (casual selling of personal items is usually tax-free, but regular selling for profit is taxable), freelancing (always taxable above £1,000), rental income (separate rules apply — see our buy-to-let guide), and investments (covered by capital gains and dividend allowances).
Use our self-employed tax calculator to estimate the tax on your side income.