How the calculator works
Every figure this calculator produces comes directly from HMRC's published rules for the 2026/27 tax year. Here is exactly what happens when you enter your details.
Step 1 — Taxable profit
You are taxed on profit, not on your total income. Profit is your gross side-hustle income minus the best deduction available to you:
- The £1,000 trading allowance — a tax-free amount every individual gets on self-employed or trading income. If your gross side income is £1,000 or less, no tax is due at all and no Self Assessment registration is needed. Source: HMRC — Check if you need to tell HMRC about your income from online platforms.
- Your actual business expenses — if your legitimate costs (materials, postage, platform fees, equipment, etc.) exceed £1,000, it will often be more beneficial to claim those instead. You cannot claim both. Source: HMRC — Expenses if you're self-employed.
The calculator automatically picks whichever deduction gives you the lower tax bill, but it cannot exceed your gross income.
Step 2 — Marginal income tax
Your side-hustle profit is added on top of your salary. It is then taxed at whatever rate(s) it falls into. Most calculators get this wrong by applying a flat rate. The correct method is:
- Calculate income tax on (salary + profit) using the bands below
- Calculate income tax on salary alone (always using the full £12,570 personal allowance)
- The difference is the tax caused by the side hustle
England, Wales and Northern Ireland (2026/27)
Source: gov.uk — Income Tax rates and Personal Allowances.
| Band | Income range | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland (2026/27)
Source: gov.uk — Scottish income tax.
| Band | Income range | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0% |
| Starter rate | £12,571 – £16,537 | 19% |
| Basic rate | £16,538 – £29,526 | 20% |
| Intermediate rate | £29,527 – £43,662 | 21% |
| Higher rate | £43,663 – £75,000 | 42% |
| Advanced rate | £75,001 – £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
Personal Allowance taper
If your combined income (salary plus side-hustle profit) exceeds £100,000, the Personal Allowance is reduced by £1 for every £2 over that threshold. It reaches zero at £125,140. This creates an effective 60% tax rate on income between £100,000 and £125,140. The taper is applied to the combined income only — not to salary alone. Source: gov.uk — Income Tax rates and Personal Allowances.
Step 3 — Class 4 National Insurance
Class 4 NI applies to self-employed profits and is entirely separate from the NI your employer handles on your salary. Rates for 2026/27:
| Profit | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 6% |
| Over £50,270 | 2% |
Source: HMRC — National Insurance rates and allowances. Class 2 NI is no longer mandatory for 2026/27 and is not included in the calculation.
Step 4 — Self Assessment registration
If your gross side-hustle income exceeds £1,000 in a tax year, you must register for Self Assessment. The deadline for the 2026/27 tax year is 5 October 2027. The return must be filed and tax paid by 31 January 2028. Source: gov.uk — Self Assessment deadlines.
What the calculator does not cover
The calculator produces an estimate based on the information you provide. It does not account for pension contributions that reduce your adjusted net income, Marriage Allowance transfers, property income (which uses different rules), or any other income sources outside salary and the side hustle you enter. If your situation involves any of these, consult a qualified accountant.