Can you be employed and self-employed at the same time?

The short answer: Yes. You can have a job and run a business alongside it. In 2026/27 you register for Self Assessment once your gross side income is over £1,000. From 6 April 2027 that line moves to £3,000, as the trading allowance trebles. Any profit is taxed on top of your salary.

Can you be employed and self-employed at the same time?

Yes. Plenty of people work for an employer in the day and run their own business in the evenings, and the government confirms you can. Your employer takes tax from your pay through PAYE (Pay As You Earn). Reporting the side business is up to you.

Each type of income comes with its own admin, so keeping the two clearly separate makes life easier. Keep a separate record of business income and costs, away from your payslips.

The trading allowance is what decides whether a small side income needs reporting at all. It's changing next April, which is why we've updated this guide.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

It's also worth reading your employment contract. Look for terms about outside work, confidentiality and conflicts of interest. Keep your employer's time, equipment and information out of your business, unless you have permission to use them.

Do I need to register for Self Assessment for a side hustle?

In 2026/27, you need to register if your gross trading income is more than £1,000. "Gross" means before expenses, with all your trades added together. Having a job doesn't change this (HMRC: trading allowance).

From 6 April 2027, the line moves to £3,000. The Budget raised both the trading allowance and the Self Assessment reporting threshold for trading income (Budget 2026: overview of tax legislation and rates, section 1.5).

Assumes none of the exceptions below apply. 2027/28 figures are as announced in the Budget on 28 October 2026 and still need to become law.

If you do need to register, the deadline is 5 October after the end of the tax year. Tell HMRC later and you could get a penalty. Our guide on how to register as a sole trader walks you through it.

You can't use the allowance at all on income from:

• your employer, or your spouse's or civil partner's employer

• a company you, or someone connected to you, owns or controls

• a partnership where you, or someone connected to you, is a partner

So if you do freelance work for the company that employs you, that income needs reporting even if it's small.

You'll also need to register, whatever your income, if you want to:

• claim relief for a loss

• pay voluntary Class 2 National Insurance

• claim Tax-Free Childcare or Maternity Allowance based on your self-employment

Not sure whether you're trading at all? Selling regularly for profit or being paid for a service usually counts (GOV.UK: working for yourself). HMRC has a quick check for extra income too.

How much can I earn from a side hustle before paying tax?

In 2026/27, the first £1,000 of gross trading income is tax-free. From 2027/28, it's the first £3,000 (HMRC: increasing the trading allowance).

There are two ways the allowance works, according to HMRC's guidance:

1. Full relief. If your gross trading income is at or under the allowance, it's tax-free and you usually don't need to tell HMRC. You must still keep records, like invoices, payment emails and bank statements.

2. Partial relief. If you earn more, you can take the allowance off your income instead of claiming your actual expenses. You can't do both, so pick whichever gives the lower profit.

HMRC's impact note says up to 1.4 million people could benefit. It expects 400,000 to pay less tax, by £380 on average. Another 100,000 won't need to report their trading income at all. People aged 35 to 64 are an estimated 62% of those affected.

Remember your Personal Allowance (the £12,570 you can earn before Income Tax) isn't doubled. Your salary usually uses it up, so side profit above the trading allowance is taxed at your normal rate.

How is side-business profit taxed on top of my salary?

Your taxable profit is added to your salary, and the total is taxed using the normal bands. A side business doesn't get its own low rate. In 2026/27, the basic rate of 20% covers income from £12,571 to £50,270, and the higher rate of 40% starts above that (GOV.UK: Income Tax rates).

Example: a £5,000 profit on a £40,000 salary

These are made-up, round numbers. Say your taxable salary is £40,000 and your sole-trader taxable profit is £5,000 in 2026/27. You have a standard Personal Allowance, no other income, and pay England, Wales or Northern Ireland rates.

Your total is £45,000, so the extra £5,000 sits inside the 20% band. The extra Income Tax is £1,000.

Example: £2,500 of side income, this year and next

Again, made-up numbers. You earn £30,000 from your job and £2,500 from a side business, with £300 of costs.

Assumes basic-rate tax in England, Wales or Northern Ireland, no other income, and none of the exceptions above. Claiming the £300 of costs instead would leave £2,200 taxable in 2026/27, so the allowance works out better here.

The result can change with:

• a different salary, especially near the £50,270 higher-rate line

• Scottish tax bands

• your pension arrangements

• other income, such as savings or rent

Do I pay National Insurance on both?

You might. Your employer takes Class 1 National Insurance from your wages. You may also owe Class 4 on your business profit. GOV.UK says the total depends on your combined wages and self-employed work, and HMRC tells you what's due after you file your return.

For 2026/27, Class 4 is 6% on profits over £12,570 up to £50,270, and 2% above that. In the £5,000 example above, the profit is below £12,570, so there's no Class 4 to pay.

Class 2 works differently. If your profits are £7,105 or more, it's treated as paid, which protects your National Insurance record. Below that, you can choose to pay voluntary Class 2, at £3.65 a week this year. Read more on how self-employed National Insurance builds your state pension.

If your combined earnings are higher, the classes can interact, so don't just add two maximum charges together.

Can HMRC take my side-business tax through my tax code?

Yes, often. HMRC can collect your Self Assessment bill through your PAYE tax code if all three of these apply:

• you owe less than £3,000

• you already pay tax through PAYE, for example as an employee

• you file online by 30 December (or on paper by 31 October)

HMRC then takes it from your salary in 12 equal monthly chunks, alongside your usual tax. It does this automatically, unless you ask it not to on your tax return. So the £300 bill in our example would come out at £25 a month.

It won't work if you don't earn enough through PAYE, or if it would mean paying more than 50% of your PAYE income in tax. Miss the 30 December online deadline and you'll need to pay another way by 31 January.

What changes for payments on account from April 2029?

From April 2029, people who make payments on account will pay towards their bill more regularly during the year. The payments will be automated, and some people will be able to choose to pay through PAYE (Budget 2026: overview of tax legislation and rates, section 2.31).

Today, payments on account are two advance payments, each half of last year's bill, due on 31 January and 31 July. You don't have to make them if last year's bill was under £1,000, or if over 80% of your tax was already paid through your tax code. That second rule can apply to people with a job, if most of their tax is already paid through payroll. Our guide on why payments on account can make your bill bigger explains how they add up.

The government chose the PAYE route as an opt-in, not a must, after the consultation. The default will be automatic payments such as Direct Debit. It says about 7 million of the 12 million people in Self Assessment also have PAYE income. HMRC plans tools from 2028 to help you estimate your bill and pay ahead. The detail is still being worked out, so nothing changes for you yet.

What can I do now?

None of these take long, and they save a scramble in January:

1. Add up your gross side income for this tax year. If it's over £1,000 and you're not already registered, the deadline to register is 5 October 2027.

2. Keep records of income and costs, even if you're under the allowance.

3. Check your payslips or P60 for any student loan repayments your employer took. You'll need them for your return, and HMRC works out the rest.

4. Look at how much tax the business adds, then set it aside as you go. The tax taken from your salary covers your job, not your new income.

5. File online by 30 December if you'd like a small bill collected through your tax code.

If you later close the business and keep the job, see what to do when you stop being self-employed.

Still got questions?

Does the £3,000 trading allowance apply to this tax year? No. For 2026/27, which ends on 5 April 2027, the allowance and the reporting line are still £1,000.

Is the £3,000 trading allowance law yet? Not yet. It was announced on 28 October 2026 and will be made law in the Finance Bill 2026-27, starting 6 April 2027.

Can I use the trading allowance on freelance work for my employer? No. HMRC doesn't let you use it on income from your employer, or your spouse's or civil partner's employer.

Does the trading allowance count against my Personal Allowance? They're separate. The trading allowance comes off your side income first. Any profit left is then added to your salary and taxed in the usual way.

Will paying through my tax code show on my payslip? Yes. HMRC adjusts your tax code, and the extra is taken from your salary with your usual tax deductions. Your contract may also ask you to tell your employer about outside work.