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Paying tax on your side-hustle or additional income

Do I need to file a tax return if I have a side hustle?

The Urban Dictionary defines a side hustle as a ‘sideline that brings in cash; something other than your main job’.

And, with the cost of living continuing to rise, it’s no surprise that many people are turning to ‘side hustles’ to generate additional income.

What you may not know is that currently, if you earn over £1,000 per year from your so called ‘side hustle’ (such as playing weekend gigs, dog-walking or babysitting) you must report this income to HMRC by filing a self assessment tax return, even if you do not owe any tax.

Registering to pay tax on your side hustle income

Most people with a taxable side hustle income choose to register as a sole trader in order to pay via self assessment.

Once registered, currently, you must submit a self assessment tax return every year.

However, it’s recently been reported that by the end of the current Parliament (April 2029 at the latest), the Government intends to change the reporting requirements for earnings of up to £3,000 per year. In the future, there will be an alternative online service, which the Government says will be simpler then self assessment.

If you are earning between £1,000 and £3,000 per year from a side hustle, contact us to discuss what this change is likely to mean to you.

How much tax will I have to pay on my side hustle income?

HMRC does not look at your side hustle income alone in order to calculate the amount of tax owed. Instead, you must declare all of your taxable income (including income from your main job), plus any deductible business expenses.

Your employment income will still be taxed at source, but you will also pay tax on your additional earnings according to the Income Tax band that your total taxable income falls into.

Tax Bands, May 2025

Bands	Taxable Income	Tax Bands
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

Example 1

If your annual earnings from your main job is £20,000 and you make an additional £5,000 profit  per year from your side hustle, your total taxable income would be as follows;

Total Income £25,000

£0 to £12,570 (Personal Allowance) 0% tax

£12,571 to £25,000 (Basic Rate) 20% tax

In this example, your side hustle income would be taxed at the basic rate (20%).

Example 2

Your annual earnings from your main job is £35,000 and you make an additional £20,000 profit per year from your side hustle, your total taxable income would be as follows;

Total Income £55,000

£0 to £12,570 (Personal Allowance) 0% tax

£12,571 to £50,271 (Basic Rate) 20% tax

£4,729 (Higher Rate) 40% tax

In this example, £15,271 of your side hustle earnings would be taxed at the basic rate (20%) and £4,729 would be taxed at the higher rate (40%).

What if I don’t pay tax on my side hustle income?

If you knowingly try to conceal your side hustle income from HMRC, you are guilty of tax evasion (a criminal offence). The financial penalties for tax evasion can be severe and can even lead to a prison sentence.

What should I do next?

If you only make a small amount of income from your side hustle, it’s simple to submit your tax return and pay what you owe. However, if you have multiple side hustles or if your income is steadily growing, it may be a good idea to talk to an accountant.

Here at PW John and Co, not only can we help you to register as a sole trader and complete your self assessment tax return for you, we can also advise you on ways to reduce your tax liability. Contact our friendly team today!