Side Hustle Tax: What You Owe HMRC in 2025

If you're making money outside your main job, HMRC expects you to declare it. Freelancing, tutoring, selling on Etsy, running a Depop shop, doing deliveries at weekends — it all counts. The rules aren't complicated, but a lot of people get caught out because they don't realise the thresholds are low.

The £1,000 trading allowance

If your total side income is under £1,000 in a tax year, you don't need to report it or pay tax on it. This is the trading allowance and it covers casual, low-level earnings.

The catch: it's £1,000 gross, not profit. If you sold £1,200 worth of stuff on Etsy but spent £500 on materials, your gross income is still £1,200 and you're over the limit. You'd need to register for Self Assessment and either use the trading allowance as a flat £1,000 deduction or claim your actual expenses instead.

When you have to register

If your side income goes above £1,000, you must:

1. Register for Self Assessment with HMRC
2. Keep records of all income and expenses
3. File a tax return each year (deadline: 31 January)

You'll pay income tax on your profits (income minus allowable expenses) and Class 2 and Class 4 National Insurance if your profits are above the thresholds.

The registration deadline is 5 October after the end of the tax year in which you started earning. Miss it and you'll get a penalty.

Expenses you can deduct

You're taxed on profit, not revenue. So anything you spend to run your side hustle can usually be deducted:

• Platform fees (Etsy, Fiverr, Uber, etc.)
• Website hosting and domain costs
• Tools, equipment, and software
• Travel costs directly related to the work
• Marketing and advertising
• A proportion of your phone bill or internet if you use them for work

Keep receipts and records. HMRC can ask to see them.

Selling second-hand stuff

Clearing out your wardrobe or selling an old phone isn't trading. You don't owe tax on that. But there's a line, and it depends on intent:

• Selling your own used belongings occasionally — not taxable
• Buying things specifically to resell at a profit — that's trading
• Regular listings, branding, or treating it like a business — HMRC may consider that trading even if each individual sale is small

The online platform reporting rules now require sites like eBay, Vinted, and Etsy to share seller data with HMRC if you make over 30 sales or earn over £1,700 in a year. That doesn't automatically mean you owe tax, but it does mean HMRC will see your activity.

Worked example

Tom has a full-time job earning £35,000. He also designs logos on Fiverr and makes £6,000 per year from it.

His side hustle expenses (software subscriptions, a drawing tablet, platform fees) total £1,500. So his taxable profit is £4,500.

His total income is now £39,500. Here's how the tax breaks down:

• Personal allowance: first £12,570 is tax-free
• Basic rate (20%): applies to £12,571–£39,500 = £26,930
• Income tax on salary: already deducted through PAYE
• Income tax on side hustle profit: £4,500 × 20% = £900
• Class 2 NI: about £3.45/week (£179/year)
• Class 4 NI: 8% on profits between £12,570 and £50,270 — but since his employed income already covers most of this band, the extra NI on his side hustle is roughly 8% of £4,500 = £360

Total extra tax and NI on his side income: roughly £1,440. He keeps about £3,060 of the £4,500 profit.

If Tom's side hustle grew and pushed his total income above £50,270, the excess would be taxed at 40% instead of 20%. Worth keeping an eye on.

How your side income is taxed alongside your job

Your side hustle profit gets added on top of your employment income. HMRC calculates tax on the total. Since your personal allowance and lower tax bands are already used up by your salary, side income often starts being taxed at your highest marginal rate straight away.

If your salary is £45,000, your side hustle income of £6,000 would push you to £51,000 — meaning £730 of that is taxed at 40% instead of 20%.

Use our salary calculator to see how adding side income affects your overall tax bill.

Deadlines that matter

• 5 October — deadline to register for Self Assessment (after the tax year you started earning)
• 31 January — deadline to file your tax return and pay what you owe
• 31 July — second payment on account, if applicable

Late filing gets you an automatic £100 penalty. Late payment accrues interest. Set calendar reminders.

Keep it above board

HMRC's data-sharing agreements with online platforms mean they can see more of your activity than ever. If you're earning above the trading allowance, register and declare it. The penalties for not doing so are worse than the tax bill itself.