If you earn money from a side hustle in the UK, you may need to pay tax on that income depending on how much you earn overall.
In general, side income is added to your main salary and taxed at your normal Income Tax rate. If your side income exceeds the £1,000 trading allowance, you will usually need to declare it to HM Revenue and Customs through Self Assessment.
This guide explains how side income tax works in simple terms and how to estimate what you might owe.
Quick Answer
- Side income is usually added to your normal salary
- You can earn up to £1,000 tax-free under the trading allowance
- Above this threshold, you may need to pay Income Tax and National Insurance
- The amount you pay depends on your total annual income
How Side Income Tax Works in the UK
Side income is generally taxed as part of your total income for the tax year.
This means:
- your salary
- freelance income
- business income
- online earnings
are combined when calculating tax.
For example:
| Income Source | Amount |
|---|---|
| Employment salary | £35,000 |
| Side income profit | £5,000 |
| Total taxable income | £40,000 |
In this example, the side income would usually be taxed at the individual’s marginal tax rate.
The £1,000 Trading Allowance
The UK trading allowance allows you to earn up to £1,000 per year from side activities without usually needing to declare it.
If your side income exceeds this threshold:
- you may need to register for Self Assessment
- you may need to pay tax on profits
For a full explanation, see our guide on the £1,000 trading allowance.
The £1,000 Trading Allowance Explained (UK Guide 2026)
UK Income Tax Bands (2026)
The amount of tax you pay depends on your total taxable income.
England, Wales and Northern Ireland
| Tax Band | Tax Rate |
|---|---|
| Basic Rate | 20% |
| Higher Rate | 40% |
| Additional Rate | 45% |
Your side income is typically taxed at whichever band your total income falls into.
Example: Basic Rate Taxpayer
Example:
| Item | Amount |
|---|---|
| Salary | £30,000 |
| Side income profit | £4,000 |
Because total income remains within the basic rate band, most of the side income would typically be taxed at 20%.
Example: Higher Rate Taxpayer
| Item | Amount |
|---|---|
| Salary | £55,000 |
| Side income profit | £5,000 |
In this situation, much of the side income may be taxed at 40%.
Do You Also Pay National Insurance?
Possibly.
If your side income profits exceed certain thresholds, you may also need to pay:
- Class 2 National Insurance
- Class 4 National Insurance
The exact amount depends on your profit level and self-employment status.
What Expenses Reduce Your Tax?
You only pay tax on your profit, not your total income.
This means allowable business expenses can reduce the amount taxed.
Examples include:
- software
- equipment
- website costs
- professional services
See our guide on what expenses side hustlers can claim in the UK.
What Expenses Can You Claim as a Side Hustler in the UK? (2026 Guide)
How to Estimate Your Side Income Tax
A simple way to estimate tax is:
Step 1
Work out:
- total side income
- minus allowable expenses
This gives your profit.
Step 2
Add this profit to your salary.
Step 3
Estimate which tax band the extra income falls into.
When Do You Need to Declare Side Income?
You usually need to register for Self Assessment if:
- side income exceeds £1,000 per year
- you are operating as a sole trader
- you receive untaxed business income
See our guide on registering as self-employed in the UK.
Do I Need to Register as Self-Employed in the UK? (2026 Guide)
Common Mistakes to Avoid
Confusing revenue with profit
Tax is generally paid on profit after expenses.
Forgetting about National Insurance
Some people only calculate Income Tax and overlook NI contributions.
Not saving money for tax
Many side earners spend income before accounting for tax owed later.
Final Thoughts
The amount of tax you pay on side income in the UK depends largely on your total annual income and whether your side hustle profits push you into a higher tax band.
For most people, the process is straightforward once you understand:
- the £1,000 trading allowance
- allowable expenses
- Self Assessment rules
As your side income grows, understanding these basics becomes increasingly important.