Short answer: As a rough rule, set aside about 30% of your side hustle profit for tax and National Insurance if you already have a job using your personal allowance. Move that share into a separate savings pot the moment each payment lands. Lower earners may need less, higher earners more, but 30% keeps most people safe from a surprise bill.
The number one reason side hustlers get a January shock is spending money that was never really theirs. Here is how to avoid it. General information for the UK, not personal tax advice.
How much should you set aside for tax?
For most people with a main job, setting aside around 30% of side hustle profit covers income tax and Class 4 National Insurance with a little buffer. If the side hustle is your only income and stays under your £12,570 personal allowance, you may owe nothing. If you are a higher-rate taxpayer, lean towards 40% or more. When unsure, saving a bit too much is far better than too little.
How does side hustle tax actually work?
Your side hustle profit is added to your other income and taxed at your normal rate: 20% in the basic band, 40% in the higher band, after the £12,570 personal allowance. On top, the self-employed pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, per GOV.UK. If your main job already uses your personal allowance, your side hustle profit is taxed from the first pound above the £1,000 trading allowance.
The one habit that prevents a tax shock
Open a separate savings account just for tax. Every time a client or platform pays you, move your set-aside percentage into it straight away. Treat that money as already gone. When the bill arrives, it is sitting there waiting. This single habit removes almost all tax stress.
How do you work out the exact amount?
Track your income and expenses so you know your profit, then apply your rate. The tax reserve calculator in our Finances Toolkit does this automatically, moving the right percentage aside as you earn so you never have to guess.
Frequently asked questions
Is 30% enough to set aside for tax?
For most basic-rate taxpayers with a main job, yes, 30% of profit covers income tax and National Insurance with a small buffer. Higher earners should set aside more.
Do I set aside tax on income or profit?
On profit, your income after allowable business expenses. Track both so you know the real figure.
When do I pay the tax I have set aside?
Through Self Assessment, by 31 January after the tax year. See our side hustle tax guide for deadlines.
General information, not tax advice. Confirm rates with GOV.UK. Related: how to register as self-employed.