Side Hustle Tax in 2026/27: The Essentials
Whether you are delivering food through Deliveroo, selling handmade goods on Etsy, or freelancing on weekends, HMRC expects you to declare your earnings and pay the right amount of tax. The good news is that the rules for the 2026/27 tax year (which runs from 6 April 2026 to 5 April 2027) are straightforward once you understand the basics. This guide walks you through everything you need to know so you can keep more of what you earn — legally.
The £1,000 Trading Allowance
The single most important relief for side hustlers is the £1,000 trading allowance. If your total gross income from self-employment or casual trading is £1,000 or less in the tax year, you do not need to tell HMRC or pay any tax on it. You do not even need to register for Self Assessment.
If you earn more than £1,000, you have two choices:
- Deduct the £1,000 allowance from your gross income and pay tax on the remainder — no need to track individual expenses.
- Deduct your actual expenses instead (e.g. materials, software subscriptions, mileage). This is better if your real costs exceed £1,000.
You cannot use both methods at the same time. Pick whichever gives you the lower taxable profit. Use our side hustle tax calculator to compare the two approaches instantly.
Income Tax Rates for 2026/27
Once you have worked out your taxable profit from your side hustle, that profit is added on top of any employment income you already receive. The combined total is then taxed at the standard rates:
- Personal Allowance: £12,570 — no tax on the first £12,570 of total income.
- Basic rate (20%): £12,571 to £50,270.
- Higher rate (40%): £50,271 to £125,140.
- Additional rate (45%): over £125,140.
If you already earn £30,000 from your day job, for instance, your side hustle profits are effectively taxed at 20% from the first pound because your Personal Allowance is already used up by your employment income.
National Insurance Contributions
Side hustle income is also subject to National Insurance. As a self-employed person you may owe two types:
- Class 2 NICs: A flat rate of £3.65 per week if your profits exceed the Small Profits Threshold of £6,725 per year. These contributions help protect your State Pension entitlement.
- Class 4 NICs: Charged at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
If your side hustle profits are below £6,725, you can still pay Class 2 NICs voluntarily to build up qualifying years for your State Pension. It is a relatively small cost for a potentially significant long-term benefit.
What About Employer NICs?
As a self-employed person you do not pay employer NICs — those only apply to businesses that hire employees. However, if your side hustle grows and you take on staff, employer NIC obligations will kick in. For most side hustlers, this is not a concern.
Registering for Self Assessment
If your side hustle income exceeds the £1,000 trading allowance, you must register for Self Assessment with HMRC. The key deadlines are:
- 5 October 2027: Deadline to register for Self Assessment for the 2026/27 tax year (if you have not already registered).
- 31 January 2028: Deadline to file your online tax return and pay any tax owed.
- 31 July 2028: Second payment on account due (if applicable).
Missing these deadlines triggers automatic penalties starting at £100, even if you owe no tax. Set a reminder well in advance.
Platform Reporting Rules
Since January 2024, digital platforms such as eBay, Etsy, Airbnb, Uber, Deliveroo, and Vinted are required to report seller earnings directly to HMRC. This does not change your tax obligations — you were always required to declare this income — but it does mean HMRC can now cross-reference what you report with what the platforms report. Accuracy matters more than ever.
If you sell personal items at a loss (for example, clearing out old clothes on Vinted for less than you originally paid), that is not taxable trading income. However, if you regularly buy items to resell at a profit, HMRC will treat it as a trade.
Expenses You Can Claim
If you opt to deduct actual expenses instead of the £1,000 trading allowance, you can claim costs that are wholly and exclusively for your side hustle. Common allowable expenses include:
- Materials and stock purchased for resale
- Software subscriptions (e.g. accounting tools, design software)
- A proportion of your phone and broadband bills
- Mileage at HMRC-approved rates (45p per mile for the first 10,000 miles)
- Platform fees and commissions
- Home office costs — you can use the simplified expenses flat rate or calculate actual costs
Keep receipts and records for at least five years. HMRC can enquire into your tax return for up to four years after the filing deadline (longer if they suspect fraud).
Simplified Expenses for Working from Home
If you use your home for your side hustle, HMRC offers flat-rate simplified expenses based on hours worked:
- 25 to 50 hours per month: £10 per month
- 51 to 100 hours per month: £18 per month
- 101 or more hours per month: £26 per month
Making Tax Digital
From April 2026, Making Tax Digital for Income Tax applies to self-employed individuals and landlords with qualifying income over £50,000. If your combined employment and self-employment income hits this threshold, you will need to keep digital records and submit quarterly updates to HMRC using compatible software. Read our guide to Making Tax Digital for side hustlers for full details.
Calculate Your Side Hustle Tax Now
Understanding the rules is one thing — knowing exactly how much you owe is another. Use our free side hustle tax calculator to enter your income and expenses, and see your estimated tax bill, National Insurance, and take-home pay for 2026/27 in seconds. No sign-up required.