Guide
How tax works on side hustle income in the UK
Side income over £1,000 is taxable in the UK. Here's how the trading allowance works, when you need to register, and how your main job affects the rate.
The £1,000 trading allowance
HMRC allows up to £1,000 of self-employment income per tax year tax-free — this is the trading allowance. Below this threshold you do not need to register or file. Above it, you must register for Self Assessment by 5 October after the tax year in which you exceeded the threshold. The allowance resets each year.
Your main job tax band determines the rate
Side hustle income sits on top of your employment income. If your main job uses up the basic rate band, your side income is taxed at 40% higher rate, not 20%. This is the most common surprise for side hustlers — the effective tax rate on the extra income is often higher than expected. Class 4 National Insurance also applies at 9% on profits above the Lower Profits Limit.
What counts as an allowable expense
Costs directly and exclusively related to the business can be deducted before tax: equipment, software, a proportion of home office costs, professional subscriptions relevant to the work, and business travel. Personal costs, general household bills, and the trading allowance itself (if you claim it) cannot be combined with allowable expenses — you choose one or the other.