A side hustle is a small business you run alongside a job. You can earn up to the £1,000 trading allowance in a tax year without telling HMRC; above that you register for Self Assessment and file a return. The money is taxed on top of your salary, so it lands in whatever tax band your wages have already taken you into. And the real cost is your evenings and weekends, which is why the rate you charge matters more than the number of customers.
At a glance
| Feature | Detail |
|---|---|
| Telling HMRC | Only once trading income passes £1,000 a year |
| How it is taxed | On top of your salary, at your highest rate |
| Your day job | Check your contract for exclusivity, permission and IP clauses |
| Usual structure | Sole trader — you can be employed and self-employed at the same time |
| The real cost | Your evenings and weekends |
| When it grows up | Steady income, turning work away, or hours clashing with the job |
What counts as a side hustle
Anything you do to make money that is not your employment. Selling things you have made or bought to resell, doing paid work for people directly, renting something out, running a van at weekends, tutoring, photography, dog walking, freelance design. If money is coming in and it is not your wages, it counts.
Selling your own unwanted possessions is different — clearing out the loft on a marketplace is not trading. Buying things specifically to sell them on is. That distinction is what HMRC cares about, and it is the one most people get wrong. This page sits inside our wider guide to starting a business.
The trading allowance, and when to tell HMRC
There is a flat allowance for casual and trading income — currently £1,000 a year. If your total income from this sort of work stays under it across a tax year, you generally do not need to register or file anything.
Go over it and you register for Self Assessment. The UK tax year runs 6 April to 5 April, and there is a deadline for registering after the year in which you started, then a deadline for filing and paying. Missing them costs money in penalties, so put the dates in your phone the day you pass the allowance.
Once you are over the allowance you get a choice each year: deduct the allowance instead of your costs, or claim your actual costs. Take whichever leaves you better off. If your costs are tiny — tutoring, say — the allowance usually wins. If you buy materials, your real costs usually win.
One more thing worth knowing calmly: online marketplaces and platforms report seller information to HMRC. It is not a trap, it just means the honest approach and the easy approach are now the same one.
Tax: your side hustle sits on top of your salary
This is the part that surprises people, so here it is plainly. Your salary uses up your tax-free personal allowance first, and fills the lower tax bands first. Your side hustle profit stacks on top of that.
So the tax on your side income is charged at the highest rate you already pay, from the first pound of profit. If your wages have you in the basic rate band, side hustle profit is taxed at basic rate plus self-employed National Insurance. If your wages have already taken you into the higher rate band, side hustle profit is taxed at higher rate straight away.
Nobody deducts any of it for you. The practical answer is to move a slice of every payment into a separate account the day it arrives, and forget it exists until the bill comes. Tax rules and thresholds change, and this is general information rather than tax advice — check the current position or ask an accountant.
Keeping the day job
Read your employment contract before you start. Three clauses matter.
Exclusivity or permission clauses. Some contracts say you cannot work elsewhere, or that you need written permission first. Asking is usually straightforward, and most employers say yes to something unrelated to their business.
Non-compete clauses. If your side hustle sells to your employer's customers or does what your employer does, that is where problems start.
Intellectual property clauses. Some contracts claim ownership of things you create that relate to the employer's business, even in your own time. Worth checking if your side hustle is creative or technical.
Then the obvious rules that keep everyone comfortable: do not use your employer's time, equipment, systems or customer list. Keep the two completely separate and there is rarely an issue.
The honest maths of hours
A side hustle is bought with the hours you have left, and there are not many of them. So the question is not "can I sell this?" — it is "is this worth a Saturday?".
Take Aisha, who works full time in an office and makes celebration cakes at weekends. She started at £45 a cake. Ingredients, board and box came to about £12, so she kept £33 — and each cake took her three hours once she counted shopping, baking, decorating and dropping it off. That is £11 an hour before tax, and because her salary already fills the basic rate band, tax and National Insurance come off that from the first pound.
So she changed the two things she could change. She put the price up to £65, which is closer to what the work is worth, and she started baking three cakes in one session instead of one at a time, which took the time per cake down to about two hours. Now she keeps £53 a cake and earns around £26 an hour of her own weekend. Six cakes a month is £390 of sales, £72 of ingredients, and £318 of profit before tax.
Do this sum before you start, not after. If the hourly figure is not worth giving up your evenings for, put the price up or change what you sell. Our pricing guide shows how to build a price from your costs rather than guessing.
Getting your first customers
Side hustles almost always start with people who already know you, and that is not a weakness — it is the fastest route to your first ten sales and your first reviews.
After that it depends on what you sell. Local services live on local search and Facebook groups; anything visual — cakes, crafts, beauty, photography — sells better on Instagram, where the work does the selling. Pick the one that fits and do it properly rather than spreading yourself across four. Our guide to marketing a small business covers both, and Plan can work out what you could afford to spend on ads later, from your own numbers.
When it stops being a side hustle
There is usually a moment when the thing outgrows the evenings. The signs are consistent: you are turning work away, the income has been steady for six months or more, the hours are colliding with the day job, or you need equipment, premises or a second pair of hands to go further. Approaching the VAT registration threshold is another one — currently £90,000 of sales.
None of that means you have to jump. It means the decision is now worth making deliberately, with numbers in front of you rather than a feeling. Two things to look at when you get there: our guide to starting a business for the practical steps, and our structures guide for whether to stay a sole trader or form a limited company.
Turning this into a plan
A side hustle plan is small and genuinely useful: what you charge, what each sale costs you to make or deliver, how many hours a week you actually have, and how much of it goes to tax. That gives you the one number that matters — what an hour of your own time is worth on this — and the month the side income would replace your wage if you kept going.
Create a mini business plan in minutes with Plan.business. Put in your rate, your hours and your costs, and it works out the rest — what you will make, when you break even, and what you need to charge to hit your target.
Frequently asked questions
Do I have to tell HMRC about my side hustle? Only once your trading income for the tax year goes over the £1,000 trading allowance. Under it, you generally do not need to register or file. Over it, you register for Self Assessment and file a return (register by 5 October after the tax year ends, file online by 31 January).
How much tax will I pay on side hustle income? It is taxed on top of your salary, so at the highest rate you already pay, plus self-employed National Insurance. If your wages already put you in the higher rate band, your side hustle profit is taxed at that rate from the first pound. Set money aside as it comes in.
Can I have a side hustle while employed? Yes, and you can be employed and self-employed at the same time. Check your employment contract first for exclusivity, permission and intellectual property clauses, and never use your employer's time, equipment or customers. Most problems come from overlap with the employer's business, not from having a side hustle at all.
Do I need to register a company for a side hustle? Usually not. Most people start as a sole trader, which is the simplest way to be self-employed. A limited company makes more sense once the income is larger or you want the business separate from you personally — our structures guide covers the trade-offs.
When should I go full time with my side hustle? When the income has been steady for several months, you are turning work away, and the numbers show it covering your bills with something to spare. Work out what a full week of it would earn, take off costs and tax, and compare that with your wage before you hand in your notice.
Figures correct as of September 2026. Tax thresholds, fees and rates change; check the linked GOV.UK pages before acting. Prices and costs shown are indicative and vary by area and by what's included.
What is Plan?
Plan is a free business operating system for people starting or newly running a UK business. It walks you, one simple step at a time, from your elevator pitch through brand, product and pricing, to a complete business plan — then uses everything it now knows about the business to help with the basics: logo and brand, marketing, a website, a bank account, funding, insurance, company registration. You can use as much or as little as you want.
Two ways to do this
Do it yourself, free. Plan walks you through the numbers — what you charge, what it costs you, the hours you actually have, what is left after tax — one short question at a time, in your browser. Do just this bit and stop there if that is all you need.
Or get help with the customers. If the side hustle is ready to grow and you would rather not learn advertising in your evenings as well: Want help getting customers? Our sister agency The Fractions runs ads and builds websites for small UK businesses — the pages, the ads and the enquiries behind them.