Do I Have to Pay Tax
on My Side Hustle? (UK 2026)

Yes, probably, but only once you cross a line. If your side hustle brings in more than £1,000 gross in a tax year, you must register for Self Assessment, report the profit and pay tax on it. At £1,000 or less, you generally owe nothing and report nothing. The rest of this guide shows where that line sits, what you will owe above it, and the dates that catch people out.

01 When do I have to tell HMRC about side income?

Short answer: when your gross trading income passes £1,000 in a tax year (6 April to 5 April). “Gross” means what you took in before any costs. Selling £1,100 of goods that cost you £900 to make still puts you over the line.

The £1,000 trading allowance is one allowance for all your trading, not one per activity. Candles on Etsy and weekend dog walking share the same £1,000. Property income has its own separate £1,000.

02 Is my side hustle a trade or a hobby?

Short answer: it is a trade if you do it to make a profit, in an organised and repeated way. HMRC looks at the whole picture using what it calls the “badges of trade”:

• Profit motive: you set out to make money, not just cover costs.
• Frequency: you sell regularly, not once or twice.
• Buying to resell: you buy items or materials in order to sell them on.
• Organisation: you have stock, a website, a shop page, business cards or a pricing system.
• Time and effort: you spend meaningful hours on it.

Clearing out your wardrobe on Vinted is not trading. Buying trainers at a discount to flip them for profit is. Most personal possessions you sell for £6,000 or less per item are also exempt from Capital Gains Tax, so a one-off sale of your own sofa is not a tax event.

03 Should I use the £1,000 allowance or claim expenses?

Short answer: whichever is larger. Once you register, you choose between deducting your actual expenses or deducting the £1,000 allowance (called partial relief). You cannot do both.

Priya’s £1,150 of real costs beats the £1,000 allowance, so she claims expenses. Her salary already uses her personal allowance and keeps her in the 20% band, so every pound of candle profit is taxed at 20%. Her profit of £3,050 is below £12,570, so she pays no Class 4 National Insurance. If her costs had been £600, the allowance would have won.

04 How much tax will I pay on side hustle profit?

Short answer: your profit is added on top of your salary and taxed at your highest rate, plus Class 4 National Insurance if profit is above £12,570. For 2026/27:

Class 2 National Insurance is no longer charged on self-employed profit. If your profit is above £7,105, you receive the National Insurance credit automatically. Employees usually have a full record already.

Dan’s salary leaves only £3,270 of room in the 20% band, so most of his profit is taxed at 40%. He keeps £9,508.20 of the £15,000, an effective rate of about 36.6%. Many people are surprised by this because they think of the side hustle as a separate pot. It is not. It sits on top of your pay.

05 How and when do I register for Self Assessment?

Short answer: tell HMRC by 5 October after the tax year in which you passed £1,000, file your return by 31 January, and pay the tax by the same date.

Two details catch first-timers. First, from the second year you will usually make payments on account, advance payments towards next year’s bill, when your Self Assessment bill is over £1,000 and less than 80% of your tax is collected at source. In Dan’s case that means about £2,745.90 extra on 31 January 2028 on top of his £5,491.80 bill, so he needs to put £8,237.70 aside for that one date. Second, if you are employed and owe under £3,000, filing online by 30 December lets HMRC collect the tax through your tax code instead, which Priya could use for her £610.

Registration itself is free. You apply on GOV.UK, receive your Unique Taxpayer Reference by post, and activate your online account. Our guide to the UTR number covers the steps.

06 What does HMRC already know about my side income?

Short answer: more than many people expect. Since 1 January 2024, UK digital platforms have collected seller details and report them to HMRC each year, with the first reports for 2024 filed by 31 January 2025. Platforms covered include online marketplaces such as eBay, Etsy, Vinted and Depop, accommodation sites such as Airbnb, and delivery and ride apps. Very small occasional sellers may be excluded.

HMRC receives your name, address, date of birth, National Insurance number, the amount you earned and the fees you paid. Overseas platforms are covered through information exchange with other tax authorities. These rules do not create a new tax, and they do not change the £1,000 allowance. They mean HMRC can compare what a platform reports against what you declare, and write to you where there is a gap.

07 What changes are coming for side hustles?

Making Tax Digital for Income Tax (MTD) is being phased in by qualifying income, which is your gross self-employment and property income before expenses, not your salary:

Dan’s £18,000 of gross freelance income is under the £20,000 line, but a good year could take him over it, and MTD means digital records and quarterly updates to HMRC. Read our Making Tax Digital guide for the detail.

The government has also announced a plan to raise the reporting threshold from £1,000 to £3,000 and let people in that range use a simpler online service. This is a plan, not law, and no start date has been set beyond “within this Parliament”. The £1,000 trading allowance itself is unchanged. Separately, you must register for VAT only when taxable turnover passes £90,000, which is far above most side hustles.

08 Frequently asked questions