This is the question most people eventually get to.
Not “do I owe tax?” but “how much?”
The answer is more manageable than you might fear. Here’s how it works.
You’re taxed on profit, not income
The most important thing to understand is that income tax applies to your profit — not your total earnings. Profit is what’s left after you’ve deducted your allowable business expenses from your income. (HMRC — Expenses if you’re self-employed)
So if you earned £3,000 from your side hustle but spent £800 on materials, fees, and postage, your taxable profit is £2,200 — not £3,000.
What expenses can you deduct?
HMRC allows you to deduct costs that are genuinely incurred as part of running your business. These can include materials or stock, postage and packaging, platform fees, business-use proportion of your phone and internet, and equipment used for your work. (HMRC — Expenses if you’re self-employed)
If you work from home, you may also be able to claim a proportion of your household running costs.
The personal allowance
Most people in the UK also benefit from a personal allowance — the amount you can earn before income tax applies. For the 2026/27 tax year, the standard personal allowance is £12,570. (HMRC — Income Tax rates and Personal Allowances)
If your side hustle income is your only income, you would only start paying income tax once your profit exceeds £12,570. For most side hustlers, that’s a comfortable threshold.
If you already have a full-time job, your personal allowance will already be used up against your employment income. Your side hustle profit would then be added on top and taxed at your marginal rate — 20% for basic rate taxpayers.
A simple illustration
Let’s say you have a full-time job earning £30,000 and your side hustle earns £4,000 profit in a year (after the £1,000 trading allowance, your taxable profit is £3,000). You’re a basic rate taxpayer. That £3,000 would be subject to 20% income tax — giving you a tax bill of £600 on your side hustle earnings.
You would also need to consider National Insurance contributions, which apply to self-employed profits above £12,570.
The £1,000 trading allowance
If your total trading income is £1,000 or below, no tax is due at all and there’s nothing to report. (HMRC — Check if you need to tell HMRC about your income from online platforms)
Where to go from here
HMRC’s Self Assessment system is the mechanism for calculating and paying what you owe. Once you’ve registered and filed your return, HMRC will confirm your tax bill. You can also use HMRC’s online resources and guidance to understand your position before you file. (HMRC — Self Assessment tax returns)
The numbers are rarely as bad as people fear. Understanding the system is always the first step.
Use our free UK side hustle tax calculator to get an instant, accurate estimate based on your actual salary and side income.