Side Hustle Tax UK Calculator

Unlock Financial Clarity Use Our Side Hustle Tax Calculator to Accurately Estimate Your UK Income Tax and National Insurance, and Master Your Earnings

Starting a side hustle in the UK is an exciting way to boost your income, pursue a passion, or build a new career path. But with extra earnings comes the responsibility of paying tax. For many, figuring out what they owe HMRC can be a daunting prospect, filled with confusing terms and complex calculations.

That’s where we come in.

Our free Side Hustle Tax Calculator is designed to cut through the confusion. In just a few simple steps, you can get a clear estimate of your Income Tax and National Insurance bill, empowering you to manage your finances with confidence and avoid any nasty surprises.

How to Use Our Side Hustle Tax Calculator

Our calculator is simple and straightforward. To get the most accurate estimate, you'll need a few key pieces of information.

Step-by-Step Guide

1. Enter Your Main Job Salary (£): If you have a PAYE (Pay As You Earn) job, enter your gross annual salary here. If your side hustle is your only source of income, you can leave this as £0.
2. Enter Your Side Hustle Profit (£): This is the crucial figure. It’s not your total sales, but your income after you’ve deducted your allowable business expenses. We'll cover what you can claim below.
3. Select Your UK Location: Tax rates differ slightly across the UK. Choose whether you are a taxpayer in England, Wales, Northern Ireland, or Scotland.
4. Confirm Your Tax Code: If you have a job, you can find this on your payslip. The standard tax code for 2024/2025 is 1257L, which means you have the standard Personal Allowance of £12,570. If you're not sure, leave it as the default.

Understanding Your Results

Once you hit 'Calculate', the tool will provide a breakdown of your estimated tax liability:

• Estimated Income Tax: The amount of tax due on all your combined earnings.
• Estimated Class 2 National Insurance: A flat-rate contribution for the self-employed.
• Estimated Class 4 National Insurance: A percentage-based contribution on your profits.
• Total Estimated Tax Bill: The combined total you should set aside for HMRC.
• Your Take-Home Profit: The amount left over after all taxes are paid, showing the real return on your hard work.

A Beginner's Guide to Side Hustle Tax

When you earn money outside of a regular job, you are essentially classed as 'self-employed' by HMRC for that income. This means you need to declare it and pay the correct tax and National Insurance.

The £1,000 Trading Allowance

The good news is that the government gives you a head start. You can earn up to £1,000 from a side hustle in a tax year (6th April to 5th April) without having to tell HMRC or pay any tax on it.

However, if your gross income (your total sales before expenses) is more than £1,000, you must register for Self Assessment and declare your earnings, even if your profit is lower.

Income Tax Bands

Your side hustle profit is added to your other income (like your salary) to determine your Income Tax band.

For England, Wales, and Northern Ireland (2024/2025):

Note: Scottish Income Tax bands and rates are different. Our Side Hustle Tax Calculator accounts for these regional differences automatically.

National Insurance for the Self-Employed

As a side hustler, you may need to pay two types of National Insurance (NI):

• Class 2 NI: This is a flat weekly rate, but for the 2024/2025 tax year, you do not have to pay it. However, if your profits are over £6,725, you will still build up qualifying years for your State Pension as if you had paid it.
• Class 4 NI: This is calculated as a percentage of your profits. For 2024/2025, you pay 6% on profits between £12,570 and £50,270, and 2% on profits over £50,270.

What are 'Allowable Expenses'?

To calculate your profit, you subtract your 'allowable expenses' from your income. These are costs incurred wholly and exclusively for your business. Common examples include:

• Office supplies (stationery, postage)
• Business travel costs (fuel, train tickets)
• Marketing and advertising fees
• Software subscriptions (e.g., accounting or design software)
• A portion of your home utility bills if you work from home (simplified expenses can be used here)

Keeping good records of these expenses is vital as it will reduce your profit and, therefore, your tax bill.

Worked Example

Let's imagine Ben, an IT consultant living in Birmingham.

• Main Job Salary: £40,000
• Side Hustle (Web Design): £10,000 in sales
• Side Hustle Expenses: £2,000 (for software, advertising etc.)
• Side Hustle Profit: £8,000

By entering these figures into the Side Hustle Tax Calculator, Ben sees the following estimated breakdown:

1. Total Income: £40,000 (job) + £8,000 (profit) = £48,000. This is all within the 20% Basic Rate tax band.
2. Income Tax: He will owe 20% tax on his £8,000 profit, which is £1,600.
3. National Insurance: His £8,000 profit is below the £12,570 threshold for Class 4 NI, so he owes £0. He also doesn't have to pay Class 2 NI.
4. Total Estimated Tax: £1,600.

Ben now knows he needs to set aside £1,600 from his side hustle earnings to pay his tax bill.

Common Mistakes to Avoid

1. Not Registering with HMRC: If you earn over £1,000, you must register for Self Assessment by 5th October after the end of the tax year in which you started.
2. Forgetting to Keep Records: You must keep records of all sales and expenses. A simple spreadsheet or accounting app is perfect.
3. Missing Tax Deadlines: The deadline to file your online tax return and pay what you owe is 31st January each year. Missing it can lead to penalties.
4. Not Setting Money Aside: Don't treat all your side hustle income as spending money. A good rule of thumb is to put 25-30% of every payment you receive into a separate savings account ready for your tax bill.

What to Do After You Get Your Result

Your calculator result is your starting point for financial planning.

1. Open a Separate Bank Account: This makes tracking your income and expenses much easier and keeps your business finances tidy.
2. Create a 'Tax Pot': Immediately start transferring a percentage of your side hustle income into a separate savings account specifically for your tax bill.
3. Register for Self Assessment: If you need to, do this on the GOV.UK website. It's a straightforward process.
4. Consider Your Financial Protection: Now that you're generating extra income, it's wise to ensure your financial safety net is secure.

Related Protection: Safeguarding Your Financial Future

Earning money on your own terms, even on the side, means you're more responsible for your financial wellbeing. If you were unable to work due to illness or injury, both your main salary and your side hustle income could be at risk.

This is where planning ahead is crucial. Consider policies like:

• Private Medical Insurance (PMI): PMI can provide you with faster access to diagnosis and treatment for eligible conditions. A key point to remember is that UK PMI is designed to cover acute conditions that arise after you take out the policy. It does not cover pre-existing or chronic conditions. Getting back on your feet quickly means you can get back to your job and your side hustle sooner.
• Life Insurance: This provides a tax-free lump sum to your loved ones if you pass away, ensuring they are financially supported. This can cover a mortgage, daily living costs, and replace your lost income streams.

As expert brokers, WeCovr can help you navigate these options, comparing policies from leading UK insurers to find cover that fits your new financial situation. Customers who buy PMI or life insurance may also be eligible for discounts on other types of cover. What's more, WeCovr provides all its customers with complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app, to help you stay on top of your health goals.

Frequently Asked Questions (FAQ)

Ready to take control of your side hustle finances?

Don't let tax worries hold you back. Use our simple Side Hustle Tax Calculator today to get instant clarity on what you owe. Once you know your numbers, speak to the friendly experts at WeCovr to discuss how you can protect your growing income with the right insurance cover.