Side Hustle Tax Calculator

Tax on side hustle income in the UK

If you earn money from a side hustle - freelancing, selling goods, tutoring, renting out assets, or any other self-employment activity - you are legally required to declare it to HMRC if it exceeds the £1,000 trading allowance in a tax year. The tax is calculated on your profit (income minus allowable expenses), and it is added on top of your PAYE income, meaning it is taxed at your marginal rate.

The £1,000 trading allowance

The trading allowance means you do not need to declare or pay tax on the first £1,000 of gross trading income in a tax year. If your income is between £1,000 and £1,001, it is still worth declaring - the allowance is deducted and you pay tax only on the excess. You cannot claim both the trading allowance and actual expenses - you must choose whichever reduces your taxable profit more. For most people with genuine business expenses above £1,000, claiming actual expenses is better.

Class 4 National Insurance

Self-employed people pay Class 4 NI on profits above the lower profits limit (£12,570 in 2026/27) at 6%, and 2% above the upper profits limit (£50,270). Note that this applies to your total self-employment profits - if your side hustle profit is below £12,570 and your PAYE salary already takes you above the threshold, you may still owe Class 4 NI on the side income at the marginal rate. Class 2 NI was abolished from April 2024, simplifying the position for lower-earning self-employed people.

Payment on account

In your first year of Self Assessment, you pay the tax owed for that year by 31 January the following year. From the second year, HMRC requires advance payments (payments on account) - two instalments of 50% of the previous year's self-assessment tax bill, due in January and July. This means in year two, your total payment can be up to 150% of one year's tax. This catches many people off guard, so setting money aside throughout the year is essential.

Frequently asked questions