1. Understanding Side Hustle Income in the UK
If you’ve ever wondered whether your weekend gig counts as a side hustle, you’re not alone. In the UK, a side hustle is simply any extra work or business activity you do alongside your main job or studies to earn additional income. It doesn’t have to be a massive commitment—even small jobs can add up and boost your budget. Everyday examples include selling pre-loved clothes on Vinted, flipping furniture on Facebook Marketplace, tutoring local students, delivering takeaways with Uber Eats, or walking dogs for neighbours. The beauty of a side hustle is its flexibility: you choose how much time and effort to invest, fitting it around your lifestyle. Whether you’re topping up your savings for a holiday or just covering rising bills, understanding what counts as side hustle income is the first step towards making the most of every pound you earn.
Personal Allowance and Tax-Free Thresholds
If you’re making extra cash from a side hustle in the UK, it’s important to understand how much you can actually keep before the taxman takes a slice. The good news is that every individual in the UK benefits from a tax-free personal allowance, which means you can earn a certain amount each year without paying any income tax at all. For the 2024/25 tax year, the standard personal allowance remains at £12,570. This allowance isn’t just for your main job – it applies to all your combined income, including side hustles like selling on eBay, freelancing, or running a small business.
If your total income (including wages, pensions, and profits from side gigs) stays below this threshold, you won’t pay any income tax. But be aware: if you earn more than £100,000 in total income, your personal allowance starts to taper off and could be wiped out entirely if your earnings reach £125,140 or above.
How Much Can You Earn Tax-Free?
To make things easier to digest, here’s a quick breakdown of how much you can earn before paying income tax:
| Total Income Source | Tax-Free Amount (2024/25) |
|---|---|
| Combined salary + side hustle | Up to £12,570 |
| Just side hustle (no other income) | Up to £12,570 |
| Side hustle (with full-time job using up allowance) | £0 (tax due on all side hustle profits) |
For those with a main job already using up their personal allowance through PAYE, any profit made from side hustles will usually be taxed at your marginal rate. But if you’re only doing a side hustle and have no other earnings, you can pocket up to £12,570 in profits completely tax-free.
Pro Tip: Marriage Allowance
If your partner earns less than the personal allowance and you’re a basic rate taxpayer, you might be able to transfer some unused allowance via the Marriage Allowance scheme – another handy way to save on your household’s overall tax bill.
3. The Trading Allowance Explained
If you’re dabbling in a side hustle or earning some extra cash from casual work in the UK, the £1,000 trading allowance could be your new best friend. This allowance lets individuals earn up to £1,000 per tax year from self-employment or “trading” activities without having to pay any tax on that income or even report it to HMRC. It’s designed for people with small-scale side gigs—think selling items online, freelance projects, tutoring, or offering handy services like dog walking.
Who Can Benefit from the Trading Allowance?
This perk is ideal for those whose side earnings are minor and irregular—like students making a bit of pocket money, hobbyists selling crafts at local markets, or anyone topping up their main income with a part-time hustle. Even if you already have a regular job or another source of taxable income, you can still use this allowance for your side gig profits.
How Does the £1,000 Trading Allowance Work?
If your total trading income (before expenses) is less than or equal to £1,000 in a given tax year, there’s no need to register as self-employed or file a Self Assessment tax return for this income—it’s completely tax-free. If you earn over £1,000 from your side activity, you’ll need to report the income and can choose to either:
- Deduct the £1,000 trading allowance instead of claiming actual business expenses
- Deduct allowable business expenses if they’re higher than £1,000
Key Points to Remember
The trading allowance applies per individual—not per business. So, if you run more than one micro-business or casual side gig, all earnings count towards the same £1,000 threshold. It’s a straightforward way to encourage entrepreneurial spirit without the admin hassle for small-scale earners.
4. Essential Deductions: What Can You Claim?
When you’re running a side hustle in the UK, knowing what expenses you can deduct is key to keeping more of your hard-earned money. HMRC allows you to claim back certain business costs from your income before calculating your tax bill. This means you’ll only pay tax on your actual profits—not every pound you bring in. Let’s break down the everyday deductions that could make a real difference to your bottom line.
Common Deductible Expenses
If you use part of your home, your phone, or even your car for side hustle activities, some of those costs can be claimed. Here are some typical allowable expenses for UK side hustlers:
| Expense Type | What You Can Claim |
|---|---|
| Home Office Costs | A portion of rent, mortgage interest, council tax, heating, electricity, and internet if you work from home |
| Phone & Internet | The business proportion of your mobile and broadband bills |
| Travel & Transport | Mileage (45p per mile for first 10,000 miles), train fares, parking (not fines), but not commuting costs |
| Materials & Supplies | Goods bought to sell or use directly in your side hustle (e.g., stock for an online shop) |
| Marketing & Website Costs | Website hosting, advertising fees, business cards, promotional materials |
| Professional Fees | Accountant’s charges or legal advice related to your side business |
| Insurance | Business-specific cover like public liability insurance or professional indemnity insurance |
| Bank Charges | Fees on a dedicated business bank account |
| Subscriptions & Training | Relevant courses or memberships that help run or improve your side hustle skills (as long as they relate directly to your business) |
Simplified Expenses vs Actual Costs
You don’t always have to keep piles of receipts—HMRC lets sole traders use “simplified expenses” for things like home office and vehicle usage. For example, instead of tracking every energy bill, you can claim a flat rate depending on hours worked at home. It’s straightforward but check if it saves you more than claiming actual costs.
Record Keeping Is Key!
No matter how small the deduction seems, always keep clear records—receipts, invoices, and logs of mileage. HMRC can ask for evidence up to six years later. Good records mean peace of mind and make filing your Self Assessment much less stressful.
By being smart about deductions and knowing what counts as a legitimate expense, you can boost the real profit from your UK side hustle—and maybe treat yourself with the savings!
5. When and How to Report Your Earnings
Step-by-Step Guide for UK Side Hustlers
When you’re earning extra income from a side hustle in the UK, understanding when and how to report your profits is crucial for staying on the right side of HMRC. Here’s a simple guide to make sure you meet all your tax obligations efficiently and avoid unnecessary stress.
1. Know When You Need to Register with HMRC
If your total self-employed income (before expenses) goes over £1,000 in a tax year (6 April to 5 April), you must register as self-employed with HMRC. This applies even if you already pay tax through PAYE at your main job. Don’t wait until the last minute—register by 5 October following the end of the tax year in which you earned this income.
2. Basics of Self-Assessment Tax Returns
Once registered, you’ll need to complete a Self Assessment tax return each year. The deadline for online submissions is usually 31 January after the end of the tax year. For example, for earnings in the 2023/24 tax year, submit your return by 31 January 2025. Through Self Assessment, you’ll declare all your side hustle income and any allowable expenses, so HMRC can calculate what you owe (if anything).
3. What Records Should You Keep?
Good record-keeping is essential! Keep clear records of all your side hustle income and related expenses, such as receipts, invoices, bank statements, and mileage logs if you travel for work. Not only does this help with accurate reporting, but it also makes it easier to claim every deduction you’re entitled to.
Top Tips for Simple Bookkeeping:
- Use separate bank accounts for your side hustle if possible
- Log transactions regularly rather than leaving it until the end of the year
- Save digital copies of receipts—HMRC accepts scanned versions
4. Don’t Miss Deadlines or Payments
Missing deadlines can lead to penalties and interest charges. Set reminders for key dates like registration deadlines and Self Assessment submissions. If you owe tax, paying by 31 January avoids late payment fees and keeps things smooth for next year’s hustle!
6. Savvy Tax Tips for UK Side Hustlers
When you’re running a side hustle in the UK, being smart about your taxes can make a real difference to your bottom line. Here are some everyday strategies and savvy tips to help you stay organised, minimise your tax bill, and keep more of your hard-earned profits—all tailored for UK rules.
Stay Organised from Day One
Keep all receipts and records related to your side hustle—whether it’s digital copies or a dedicated notebook. Use apps like HMRC’s Personal Tax Account or accounting software such as QuickBooks or FreeAgent to track your income and expenses throughout the year. Staying organised means you won’t miss out on allowable deductions when it’s time to do your Self Assessment.
Make the Most of Allowances
If your total side hustle income is under £1,000 per tax year, you don’t need to register as self-employed thanks to the Trading Allowance. If you earn more, remember that you only pay tax on profits above this threshold, after allowable expenses and deductions.
Claim All Legitimate Expenses
Be sure to claim for everything you’re entitled to: office supplies, travel costs (excluding commuting), marketing fees, and even a portion of home utility bills if you work from home. Keeping detailed records will back up any claims if HMRC ever asks questions.
Consider Going Digital
The UK government is encouraging everyone to file digitally through Making Tax Digital. Using digital tools not only helps with compliance but can also streamline your record-keeping, making tax time far less stressful and reducing the risk of costly mistakes.
Plan Ahead for Payments
Set aside a percentage of every side hustle payment into a separate savings account for your tax bill. This prevents any nasty surprises when payment deadlines roll around in January and July each year. Remember, if your side profits grow, you may also need to pay Class 2 or Class 4 National Insurance contributions.
Get Professional Advice When Needed
If your side hustle starts taking off or becomes more complex, consider speaking to a qualified accountant familiar with UK small business tax. A bit of expert advice can help ensure you’re claiming everything you should be—and staying on the right side of HMRC.
By following these practical, everyday tips, you’ll be well placed to maximise your profits while keeping your UK tax affairs in good order. That’s more money in your pocket—and less stress come tax season!
