Side hustle tax in the UK: The latest updates if you’re earning extra income

What is a side hustle?

First of all, a side hustle is anything you do outside of your main job to earn extra income. It could be something you do every now and then, like selling clothes on Vinted or walking dogs for your neighbours, or something more regular, like running a small business, freelancing, or working as a UW Partner.

The beauty of side hustles is that they can be flexible, meaning you choose when, where, and how often you work. Whether it’s a creative passion, a chance to earn more, or a way to build something for yourself, side hustles come in all shapes and sizes.

Some people start a side hustle to save for something special. Others do it to top up their income during a cost-of-living squeeze. You can learn more about side hustles and some of the most profitable ones to start here.

Whatever your reason, if you’re earning extra money on the side, it’s worth knowing the rules around tax, especially if your income starts to grow.

Do you have to pay tax on a side hustle?

Whether you have to pay tax on a side hustle or not depends on how much you earn and if your side hustle is considered self-employed income by HMRC.

You’ll need to pay tax on any earnings you make from your side hustle if they exceed a certain amount in a tax year. You don't need to report your earnings or pay side hustle tax if your earnings are below this threshold. Don’t worry, we’ve covered everything you need to know about this allowance below.

What is side hustle tax?

‘Side hustle tax’ is just a way of describing the tax you might need to pay on any money you earn outside of your main job.

Think of it like this: if you have a regular job, you’re probably used to paying tax through Pay As You Earn (PAYE). Your employer handles it, and the right amount of tax should be deducted from your payslip automatically. But when you earn money outside of that job – from a side hustle –  it’s your responsibility to report it to HMRC and pay tax on what you’ve earned as extra income.

Even if your side hustle is something you only do in your spare time, it still counts as additional income – and, just like your day job, it might be taxable. It’s up to you to keep track of what you earn, and HMRC expects you to report it if it passes the threshold.

Who needs to pay tax on their side hustle?

In the UK, there’s a tax-free amount called the trading allowance, which lets you earn up to £1,000 a year from self-employed or additional income before you need to tell HMRC. 

But if your side hustle brings in more than that, you’ll usually need to:

• Register for Self-Assessment

• Submit a yearly tax return

• Pay any income tax and National Insurance that’s due

This applies even if you only work on your side hustle occasionally or if it’s something you do around your main job. Regardless of how often you put in the extra grind, HMRC considers it taxable income once it passes the £1,000 threshold, and it’s your responsibility to report it correctly.

This means it's crucial to understand what counts toward that allowance and what to do if you go over it.

How much can you earn before declaring to HMRC?

The good news is that you don’t need to report every pound of side hustle income to HMRC. Thanks to the trading allowance, you can earn up to £1,000 a year from self-employed or casual work before needing to declare it.

This allowance applies to your total income from side hustles, not your profit after expenses. So even if you only take home a small amount after costs, HMRC still looks at the full amount you’ve earned to decide whether you’ve crossed the threshold.

Say, for example, if your side hustle income stays under £1,000 in a tax year, you won’t need to do anything. But once you go over that figure, even by a small amount, you’ll need to declare it to HMRC by filing an online Self Assessment tax return.

It’s also worth noting that your full-time job and any other income are all counted together when HMRC works out how much tax you owe. So even if your side hustle income feels quite small, it could affect the rate of tax you pay overall and, in some cases, push you into a higher tax bracket.

For example, if you’re currently on the basic rate of income tax and already earn close to the higher rate tax threshold through your full-time job, any additional income from a side hustle might change your tax bracket. That means you’d pay 40% tax (instead of 20%) on anything over the higher-rate threshold.

Here’s how that looks in practice (based on 2025/26 tax year figures):

• You can earn up to £12,570 tax-free as part of your Personal Allowance.

• Income between £12,571 and £50,270 is taxed at the basic rate of 20%.

• Income between £50,270 and £125,140 is taxed at the higher rate of 40%.

• Anything you earn over £125,140 is taxed at the additional rate of 45%.

So, if your full-time job brings in £49,000 a year and your side hustle earns you an extra £2,000, the first £1,270 of that side hustle income would be taxed at 20%, and the remaining £730 would be taxed at 40%.

That’s why it’s a good idea to keep clear and accurate records of every payment you receive from your side hustle – whether that’s commissions, product sales, or freelance fees. It’ll make filing your tax return easier, and you’ll be better prepared when it comes to working out what you owe.

Do you have to pay tax on your UW Partner income?

If you’re a UW Partner, the income you earn – whether from commissions for customer sign-ups, bonuses, or residual income – is treated as self-employed income by HMRC. That means it falls under the same rules as any other side hustle or freelance work.

So, do you have to pay tax on it? Well, that depends on how much you earn.

If you make less than £1,000 in a tax year from your UW Partner activity, you’re covered by the trading allowance and won’t need to declare it. But if you earn over £1,000, even by a small amount, you’ll need to pay any income tax and National Insurance owed on your UW income.

It’s important to note that you only get a single £1,000 trading allowance per tax year, which counts towards multiple side-hustles. So if, for example, you earn only £900 from your UW Partner activity in a tax year, and only £200 from a second side-hustle in the same tax year, you’ll need to declare the total earnings of £1,100 to HMRC.

Because UW Partner earnings are paid directly to you, without tax deducted, it’s your responsibility to track what you’ve earned and keep accurate records.

How to declare your side hustle income

Declaring your side hustle income to HMRC might sound complicated, but it’s pretty straightforward once you know what to do.

Here’s a breakdown:

• Register with HMRC

If it’s your first time earning self-employed income, you’ll need to register with HMRC. You can do this online on the gov.uk site here. 

As part of the process, you’ll have to let them know what kind of business you run, like whether you’re a sole trader or a limited company. If you’re a UW Partner, you’ll be classed as a sole trader.

Once registered, you’ll receive a Unique Taxpayer Reference (UTR), which you’ll need whenever you file a return.

• Keep track of what you earn

After you’re registered, it’s a good idea to keep a record of all the income you make from your side hustle. You don’t need a fancy system; a simple spreadsheet, notebook, or accounting app can work just fine.

• Submit your tax return

At the end of the tax year (which runs from 6th April to 5th April), you’ll need to complete a Self-Assessment tax return online. The deadline for online submissions is 31st January of the following year.

For example, if you need to report your side hustle income for the 2024/25 tax year, you’ll have until the 31st January 2026 to submit your Self-Assessment to HMRC online.

You can also submit a paper tax return, but the deadline for submission is midnight on 31st October.

• Pay any tax and National Insurance

Once your return is submitted, HMRC will let you know how much tax and National Insurance you owe.

You’ll need to pay this by 31st January, the same date as the deadline for submitting online tax returns, too. If your tax bill is over £1,000, you may also be asked to make payments on account for the next tax year; this is where you’ll pay half of your next tax bill for the previous year in advance.

What happens if you don’t pay tax on your side hustle?

If you don’t report your side hustle income, pay the tax you owe, or do these things late, you can be liable for serious consequences, so it’s always best to stay on top of your extra income.

Here are some of the penalties that you could face:

• Fines – HMRC can charge penalties for late Self-Assessment registration, along with filing or paying the amount you owe late. The fines vary depending on how overdue the payment becomes, and these can quickly add up, so it’s vital to stay ahead of deadlines.

• Interest – HMRC will charge interest on any unpaid tax and the penalty for sending a late tax return increases over time, meaning the more overdue they are, the more you’ll owe.

In more serious cases, HMRC can also take further measures to recover the money owed, including sending debt collectors or even taking legal action.

What expenses can you claim as a side hustler?

As a side hustler, you can claim certain expenses that are directly related to your business activity. These expenses reduce the amount of tax you’ll pay, as HMRC only taxes the profit you make after expenses.

Here’s a breakdown of some common business expenses that might apply to your side hustle:

• Phone bills – If you use your phone for business calls or to manage your business, you can claim a portion of your phone bill.

• Internet cost – Similarly, if you’re using your home broadband to run your side hustle, you can claim part of your broadband costs.

• Utility bills – You can claim a portion of your energy bills, like electricity, gas, and water, based on how much of your home is used for business purposes.

• Office supplies – You can deduct things like stationery, printer ink, and even a new computer for your side hustle.

You can find a full list of allowable expenses on the HMRC site here.

The key thing to remember is that you can only claim expenses that are fully and exclusively for business purposes. This means you can’t claim for things that are used for personal reasons, like your entire phone bill, if you’re also using it for personal calls. You’ll need to apportion the costs based on how much is used for business.

Making Tax Digital: latest updates to know

In the past, Self-Assessment tax returns were mostly paper-based or filed online through HMRC’s website.

Then, HMRC introduced a new initiative called Making Tax Digital (MTD) to simplify and improve the UK tax system. This will require businesses and individuals to use digital tools to manage their tax records and file returns.

MTD has already been introduced for VAT-registered businesses, and there are some important updates you should know about if you're a side hustler or a UW Partner earning self-employed income.

In April 2026, Making Tax Digital for Income Tax Self-Assessment will apply to self-employed people and landlords with an annual income of over £50,000. This means that after April, you’ll need to use digital records and software to keep track of your income and expenses and submit your Self-Assessment tax return.

So if you’re making over £50,000 a year from your side hustles, you’ll need to:

• Sign up for the scheme before the 6th April 2026 deadline (you can do this here);

• Use compatible software to maintain digital records of your income and expenses;

• Submit quarterly updates to HMRC (rather than waiting until the end of the year to file your return); and

• Submit your year-end tax return digitally.

Stay on top of your side hustle tax today

Understanding side hustle tax is essential for managing your extra income, whether you're a UW Partner or running another side hustle. By staying organised, keeping track of your earnings, and filing on time, you can avoid common mistakes and ensure you comply with HMRC.

Are you ready to boost your income? Learn more about becoming a UW Partner today.