UK Side Hustle Tax 2025/26: The Complete Guide

Last updated: May 2026 · 12 min read

This is the cornerstone guide. If you have side income from any UK platform, selling, renting, gig work, content creation, freelancing, this page tells you what the rules are, what you owe, what you can claim, and what to do next. Skip to the calculator below if you just want a number.

1. The £1,000 trading allowance

The single most useful relief for UK side hustlers. If your gross trading income across all sources is £1,000 or less in a tax year (6 April to 5 April), you owe no tax and don't need to file Self Assessment for it.

Above £1,000, you choose each year:

• Use the £1,000 allowance: subtract £1,000 from gross income, pay tax on the rest. Cannot also claim expenses.
• Claim actual expenses: deduct real allowable costs, pay tax on net profit.

The calculator picks whichever saves you more.

2. The £1,000 property allowance (separate)

If your side income is from renting (Airbnb, SpareRoom, lodger, parking) you get a different £1,000 allowance, the property allowance, that works the same way. You can claim both allowances if you have both types of income.

For lodgers in your main home, the £7,500 Rent a Room scheme is even more generous, see the Airbnb host tax guide.

3. Income tax bands for 2025/26 (England, Wales, NI)

The personal allowance tapers if your total income exceeds £100,000, you lose £1 of allowance for every £2 over £100,000, so it's gone entirely at £125,140. Effective marginal rate in this band is 60%.

Scottish income tax bands are different. NI is the same UK-wide.

4. National Insurance for self-employed (Class 4)

You pay Class 4 NI on self-employment profits in 2025/26 as follows:

Class 2 NI was abolished as a mandatory contribution from April 2024. If your profits exceed the Small Profits Threshold (£6,725) you get NI credits automatically. Voluntary Class 2 (£3.50/week in 2025/26) is still useful if you want to keep building State Pension entitlement on profits below that threshold.

Property income is NOT subject to Class 4 NI. HMRC treats rental income as investment income, not earnings.

5. When do I need to file Self Assessment?

You must register and file if any of the following apply:

• Gross trading income over £1,000 in the tax year (even if profit is £0)
• Property income over £1,000 (or net property profit over £2,500)
• You have untaxed income from dividends, interest, capital gains, or foreign sources above thresholds
• You receive Child Benefit and you (or your partner) earn over £60,000 (HICBC)
• You're claiming reliefs (e.g. higher-rate pension tax relief)
• You owe tax HMRC can't collect through PAYE

Note: the old £100,000 (later £150,000) PAYE-only filing threshold was removed entirely from 2024/25 onwards. High earners with all income via PAYE no longer have to file just because of their salary.

Register by 5 October following the tax year (so 5 October 2026 if you started side hustling in 2025/26). File and pay by 31 January.

6. Records you need to keep

HMRC requires you to keep records for at least 5 years after the 31 January filing deadline. For the 2025/26 tax year, that means until 31 January 2032.

Practical records to keep:

• All sales income (platform statements, invoices, bank deposits)
• Receipts for every business expense
• Mileage log if claiming travel
• Asset purchase records (for capital allowances)
• Bank statements (separate business account makes this easier)

7. The HMRC platform reporting rules (in plain English)

From 1 January 2024, online platforms (Vinted, eBay, Etsy, Depop, Airbnb, OnlyFans, Substack, Uber, Deliveroo, etc.) are legally required to report UK seller data to HMRC. The thresholds:

• 30 transactions in a calendar year, OR
• €2,000 (~£1,735) in earnings.

The first reporting deadline was 31 January 2025 (covering 2024). The second is 31 January 2026 (covering 2025). HMRC cross-references this against Self Assessment filings.

Crossing the reporting threshold is not the same as owing tax. If you're a casual seller of your own personal items, you don't owe tax even if your data is reported. But it does mean HMRC has the data, and you may receive a "nudge letter" asking you to confirm you've declared everything.

8. Expenses you can claim (general)

Any cost incurred wholly and exclusively for the business:

• Platform fees, processing fees
• Materials, packaging, postage
• Software subscriptions
• Equipment (capital allowance, full cost in year of purchase under the Annual Investment Allowance)
• Mileage at 45p/mile for first 10,000 miles, 25p thereafter
• Use of home: HMRC's flat rates are £10/£18/£26 per month based on hours worked from home
• Phone/internet (proportional to business use)
• Marketing and advertising
• Accountant and bookkeeper fees
• Professional subscriptions and training

9. Penalties for getting it wrong

Voluntary unprompted disclosure attracts much smaller penalties than disclosure after HMRC contacts you. Don't wait.

10. The simplest possible workflow

1. Open a separate bank account for side hustle income (Starling Personal works, no fees).
2. Every month, transfer 30% of profit into a savings pot for tax.
3. Track gross income and expenses in a spreadsheet (or use software like FreeAgent/Coconut).
4. Register for Self Assessment by 5 October following the tax year (or earlier).
5. File and pay by 31 January.
6. Keep records for 5+ years.