Work out the tax on side hustle income on top of your salary, using the £1,000 trading allowance or actual expenses, with Class 4 NI only where it applies.
Source: GOV.UK — Set up as a sole trader
By Konstantin Iakovlev · Founder, Calks.uk
Last updated: · Verified against HMRC and GOV.UK 2026/27 rates
Rates verified: 28 September 2026
Disclaimer
This calculator is for guidance only. It is not financial or tax advice: check anything you rely on against the official source or a qualified adviser. Rates and figures come from HMRC and GOV.UK and are reviewed for the 2026/27 tax year. Everything is calculated in your browser; nothing you enter is sent to our servers.
How It Works
Side hustle income is taxable once it passes the £1,000 trading allowance. Stay below that and there is nothing to declare and no need to register. Go above it and you have to register as self-employed with HMRC, file a Self Assessment return and pay income tax plus Class 4 National Insurance on the profit. The allowance covers most small trading activity, from freelance work and tutoring to dog walking, gardening and selling crafts, and there is a separate £1,000 property income allowance for rental income that does not come from your main home.
Whether you are trading at all is the first question. Selling new items for profit on eBay, Vinted or Depop is trading. Clearing out your own second-hand belongings is not, so a wardrobe sale does not create a tax bill however much it raises. Once you are trading, you can either take the £1,000 allowance off your gross income or deduct your actual expenses, whichever leaves the smaller taxable profit. On £8,000 of income with £2,000 of expenses, the allowance leaves £7,000 taxable while real expenses leave £6,000, so expenses win.
Tax is charged at your marginal rate, meaning the rate that applies once the side income is stacked on top of your salary. Someone earning £40,000 with £8,000 of side profit reaches £48,000 and stays inside the basic rate. Someone on £45,000 with the same £8,000 reaches £53,000, so £5,270 of it is taxed at 20% and the remaining £2,730 at 40%. Above £125,140 the additional rate of 45% applies. Class 4 National Insurance runs at 6% on profits between £12,570 and £50,270 and 2% above that, and that £12,570 is measured on the side profits alone, because salary does not count towards it, so most side hustles pay no Class 4 at all.
Registration has its own deadline, 5 October following the tax year in which you crossed the threshold. Earn £1,500 from a side hustle in 2025/26 and you register by 5 Oct 2026, then file and pay by 31 Jan 2027. The form at gov.uk/register-for-self-assessment takes about 10 minutes and your UTR arrives 2-4 weeks later. Registering late can bring a penalty of up to 100% of the tax left unpaid as a result (nothing if no tax was owed), and late filing penalties, starting at £100, stack on top of it.
VAT only enters the picture at £90,000 of turnover, the threshold since it rose from £85k in April 2024, and few side hustles get near it. You can register voluntarily at any level, and the trading allowance has nothing to do with VAT, since it is an income tax relief. If your turnover is climbing towards the threshold, register before you cross it rather than afterwards.
Platforms now report to HMRC. Since 2024 eBay, Etsy, Vinted, Airbnb, Uber, Deliveroo, OnlyFans, Patreon, Twitch, YouTube and Just Eat pass on seller data, and HMRC matches it against tax returns. A seller of goods is left out only with fewer than 30 sales and €2,000 (about £1,700) or less in the year; services and rentals are reported whatever the amount. Undeclared trading is being investigated far more often as a result. Penalties reach 100% of the tax owed, with interest on top, and the most serious cases can end in prosecution, so declaring anything above the allowance is much the cheaper course.
Example: £8,000 side income, £2,000 expenses, £35,000 day job
- Side income: £8,000, Expenses: £2,000
- Option A (trading allowance): £8,000 − £1,000 = £7,000 taxable
- Option B (actual expenses): £8,000 − £2,000 = £6,000 taxable
- Best option: B (actual expenses) — saves tax on £1,000
- Tax on £6,000 at 20%: £1,200. Class 4 NI: £0, because £6,000 of profit is under the £12,570 lower profits limit (salary does not count). Total: £1,200
Source: GOV.UK — Set up as a sole trader
Frequently Asked Questions
- Do I need to declare side hustle income?
- Only if your trading income for the year tops the £1,000 trading allowance. Above that you register as self-employed by 5 October following the tax year, then file a Self Assessment return and pay by 31 January. Registering late can cost up to 100% of the tax that went unpaid as a result, and late filing penalties, starting at £100, can push the total past £1,600. Selling your own second-hand things is not trading, so a clear-out does not count, but selling new items for profit does.
- Does HMRC get my sales data from eBay and Vinted?
- Yes. Since 2024 the major platforms, including eBay, Etsy, Vinted, Airbnb, Uber, Deliveroo, Patreon, Twitch, YouTube and Just Eat, report seller data to HMRC, and it is cross-checked against tax returns. A seller of goods is left out only with fewer than 30 sales and €2,000 (about £1,700) or less in the year; income from services and rentals is reported whatever the amount. If you traded above the allowance in earlier years without declaring it, a voluntary disclosure through HMRC's Digital Disclosure Service usually carries penalties of 10-30% for careless errors more than a year old, against 20-30% if HMRC finds it first, and 35-100% if HMRC treats it as deliberate.
- How is side hustle income taxed?
- It is added to the top of your other income, so the rate depends on what you already earn. Profits inside the basic rate band are taxed at 20%. Class 4 National Insurance of 6% only starts once the side profits alone pass £12,570, since salary does not count towards that limit, so setting aside 20-25% is usually enough for a basic-rate taxpayer and 40% for a higher-rate one. Allowable expenses such as software, marketing, mileage, supplies and training reduce the profit before tax. On £40,000 of salary and £8,000 of side profit the bill comes to £1,600 of income tax and no Class 4 NI.
- Do I need to register for VAT on a side hustle?
- Only once taxable turnover reaches £90,000, up from £85k in April 2024, which most side hustles never approach. The test looks back over 12 months and forward 30 days, so register before you cross rather than after. Voluntary registration is possible at any level and can pay off if you sell to businesses that reclaim VAT. Registration also brings Making Tax Digital, meaning quarterly returns filed from compatible software such as Xero, QuickBooks or FreeAgent.