Question 1

What is the £1,000 trading allowance?

Accepted Answer

If your total gross side hustle income is £1,000 or less in a tax year, you pay no tax and do not need to register for self-assessment — it is fully covered by the trading allowance. If you earn more than £1,000, you can still deduct the £1,000 trading allowance from your gross income to reduce your taxable profit. You cannot claim both the trading allowance and actual expenses, so you should use whichever is higher.

Question 2

How is side hustle income taxed on top of a salary?

Accepted Answer

Side hustle profit is added to your employment income and taxed at your marginal rate. If your salary already uses up the basic rate band (earnings above £50,270), your side hustle profit will be taxed at 40%. If you earn £35,000, your remaining basic rate allowance is £15,270, so the first £15,270 of side profit is taxed at 20% and anything above at 40%. This is why small side hustles can be taxed more heavily than people expect.

Question 3

Do I pay National Insurance on side hustle income?

Accepted Answer

Yes, if your self-employed profit exceeds £6,845 you pay Class 2 NI at £3.65 per week (£189.80/year flat rate). If your profit exceeds £12,570, you also pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 and 4 NI are separate from the Class 1 NI you pay through your employer, though if you pay both, you may be able to reclaim any over-payment via HMRC.

Question 4

When do I need to register for self-assessment?

Accepted Answer

If your gross side hustle income exceeds £1,000 in a tax year, you need to register for self-assessment with HMRC. The deadline to register is 5 October following the end of the tax year (e.g., 5 October 2027 for 2026/27 income). You then file your tax return online by 31 January 2028 and pay any tax owed by the same date. Late registration can result in penalties.

Question 5

What counts as allowable business expenses?

Accepted Answer

Allowable expenses are costs incurred wholly and exclusively for your business. For Etsy/Vinted sellers: materials, packaging, postage, marketplace fees, photography equipment. For freelancers: software subscriptions, professional memberships, home office costs (proportional), training directly relevant to your work. Personal costs or costs with a dual personal/business purpose generally cannot be claimed. If your expenses are under £1,000, use the trading allowance instead — it is simpler and gives the same or better result.

Question 6

Does selling second-hand items on Vinted, eBay or Facebook Marketplace count as taxable income?

Accepted Answer

Only if you are trading commercially. Casual selling of personal possessions you no longer want  -  old clothes, books, household items  -  is generally not taxable because you are not running a business; you are simply liquidating assets. If you are regularly buying goods specifically to resell at a profit (even on resale apps), HMRC considers this trading and the profit is taxable as self-employment income. The £1,000 trading allowance applies, so small-scale sellers earning under £1,000 gross have nothing to declare or pay.

Question 7

What if my side hustle makes a loss?

Accepted Answer

Trading losses can be carried forward and offset against future profits from the same business. You cannot normally use a side hustle loss to reduce tax on your employment income in the same year, unless you were running the business on a commercial basis with a view to making a profit  -  in which case HMRC may allow sideways loss relief. Record all expenses carefully even in unprofitable years, as carried-forward losses can significantly reduce your tax bill once the business becomes profitable.

Side Hustle Tax Calculator UK 2026/27