Best Accounting Software for Side Hustles in the United Kingdom (2026)

In March 2025 Which? reported that HMRC was sending around 6,000 letters to people it suspected of not declaring taxable earnings from side hustles, writing only to those who had made more than 30 transactions and earned over £2,000 from sales in 2021-22 and 2022-23. If you have a job and sell or freelance on the side, that money is taxable. It is taxed on top of your salary, at your highest rate, and the bill lands in one go the January after the tax year ends.

You can try to avoid that by putting a slice of every sale aside and hoping it was enough. The safer way is to keep proper records as you go, in low-cost accounting software, so you always know your real profit and the tax on it. Below are the UK rules for the 2026/27 tax year, a worked example of how the bill builds up, and what the software does.

Do I pay tax on my side hustle on top of my salary?

Yes, once it passes the £1,000 trading allowance in a tax year. Side income above that is added to your salary and taxed at your marginal rate, the rate on your top slice of income, which for most employees is 20% or 40%. You declare it through Self Assessment, HMRC's annual tax return, because your employer's PAYE never sees it.

The trading allowance is measured on gross income, your sales before any costs, across all your side activities combined. Under £1,000 you owe nothing and do not have to report it. Over £1,000 you register for Self Assessment by 5 October after the tax year ends, file a return and pay the tax yourself.

The allowance is an alternative to expenses, not an extra on top. Each year you choose one: deduct £1,000 and ignore your costs, or deduct your real costs and ignore the allowance. If you spend more than £1,000 making or selling what you sell, real expenses win, but only if you can show what you spent.

One change is on the horizon. In March 2025 the government announced that it intends to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000 gross "within this parliament". It is an announcement, not law, and it has no start date. People between the two figures would still pay any tax they owe, through a simpler online service. Until it is legislated, the £1,000 figure is the one that applies.

What rate is side hustle profit taxed at?

Your salary has already used your £12,570 Personal Allowance, so side profit is taxed from the first pound at the band your salary ends in: 20% basic rate, 40% higher rate or 45% additional rate in England, Wales and Northern Ireland for 2026/27. It can also push you into the next band. Scotland has its own rates.

Five details change the bill:

• National Insurance is lighter than you might fear. Class 4 National Insurance is charged on self-employed profit alone, at 6% between £12,570 and £50,270 and 2% above, and your salary does not count towards that £12,570. A side hustle with under £12,570 of profit pays none. Class 2 is voluntary when profits are below £7,105.
• The 60% band. Between £100,000 and £125,140 your Personal Allowance goes down by £1 for every £2 of income above £100,000, reaching zero at £125,140. In that band each extra £1 of side profit is taxed at 40% and also removes 50p of allowance, so the effective rate is about 60%.
• Scotland has different rates. Scottish income tax has six bands with rates from 19% to 48%, so the chart above does not apply to a Scottish taxpayer. The bands are on that page.
• Bigger bills get split. Once a Self Assessment bill reaches £1,000, HMRC usually asks for payments on account: two advance payments towards next year's bill, each half of this year's, due 31 January and 31 July. In the first year they apply, the January payment is the year's tax plus half of it again. You are let off if more than 80% of your tax is already collected at source, which is common with a full-time job and a modest hustle.
• Student loans count side profit. If you are repaying a student loan, HMRC works out the repayment on your return from your combined income for the year, at 9% of income over your plan's threshold (6% for a Postgraduate Loan), less what your employer already deducted.

Does HMRC check Vinted, eBay and Etsy sales?

Yes. Since 1 January 2024 digital platforms have had to collect their UK sellers' details and send a report to HMRC each January; the first reports were made in January 2025. That covers marketplaces, gig apps, rental sites and freelance platforms, and it is how HMRC now matches platform income against tax returns.

The exclusion is narrow. A seller of goods who stays under both 30 sales and 2,000 euros (about £1,700) in a calendar year is not reported; go over either figure and the platform may report you. Services are not excluded at all: tutoring, freelancing, driving and deliveries are reported whatever the amount. HMRC's own page says being on a report "does not automatically mean you owe tax". Clearing out your own wardrobe is unlikely to be taxable. Buying or making things to sell is trading, and trading income above £1,000 is.

When do I register, and what are the deadlines?

Register for Self Assessment online at gov.uk by 5 October after the end of the tax year in which your side income first passed £1,000; the tax year runs from 6 April to 5 April. File the return and pay by the following 31 January. File by 30 December instead if you want a bill under £3,000 collected through your tax code.

You do not need to tell your employer. Self Assessment is between you and HMRC, and a tax code change does not say why it changed.

The 2025/26 tax year ran from 6 April 2025 to 5 April 2026, so its registration date has passed: if you crossed £1,000 in it, register now rather than wait for a letter, because registering late carries its own penalty. Miss the filing date and the penalty starts at £100 the day after, then £10 a day for up to 90 days once the return is three months late.

How much tax will I pay on £8,000 of side income?

A basic-rate employee who sells £8,000 of goods and can show £3,200 of costs pays £960 of income tax on the £4,800 profit at 2026/27 rates, and no National Insurance, because the profit is under the £12,570 Class 4 threshold. Without the receipts to prove those costs, the £1,000 allowance is the only deduction and the bill is £1,400.

Here is that case in full. Priya is an illustrative example, not a real person. She is on £35,000 a year in a full-time job and sells handmade ceramics on Etsy and at weekend markets. In the 2026/27 tax year she sells £8,000 worth and spends £3,200 on clay, glazes, kiln firing, packaging, postage and platform fees. She lives in England.

Her salary already uses her Personal Allowance, so every pound of side profit is taxed at the basic rate of 20%; her total income of £39,800 stays below the £50,270 higher-rate threshold.

The figures are exact at 2026/27 rates; a real return would also round pence away. Look at when the money is due. Nothing comes out of Priya's pay while she is selling. The tax year ends on 5 April 2027 and the whole bill is due on 31 January 2028, nearly ten months later, by which point the sales money has long since mixed in with everything else.

The receipts are worth £440 to her: that is the gap between the two routes. Her bill is under £1,000, so HMRC does not ask her for payments on account, and because it is under £3,000 she can file online by 30 December 2027 and have it collected through her 2028/29 tax code instead.

Should I save a percentage, or keep proper records?

Saving a share of each sale is better than nothing, but it is a guess: the right figure depends on your band, your costs and whether payments on account apply. Keeping records as you go removes the guess. You know your actual profit at any point in the year, so the tax on it is never a surprise in January.

Some people move a fixed share of every sale into a savings pot and hope it covers the bill. It can work, but set the share too low and January still hurts; set it too high and money sits idle. It also does nothing to lower the bill, which is the other half of the job.

Accounting software does four things a savings pot cannot:

1. Records every payment as it happens. A bank feed from a separate account pulls in each sale and cost, so nothing has to be remembered or typed up later.
2. Keeps the receipts. Photograph the receipt for clay or a box of mailers and it is filed against the right expense. Those records are what made the expenses route £440 cheaper for Priya, and what HMRC can ask to see for five years after the filing deadline.
3. Shows your real profit at any time. Sales less costs, for the tax year so far. Apply your rate to that figure and you know what is coming.
4. Hands over the figures for the return. At the end of the year the profit is ready for Self Assessment, whether you file it yourself or pass it to an accountant.

There is a second reason the UK is moving this way. Making Tax Digital for Income Tax makes compatible software compulsory once your qualifying income (gross self-employment plus property income before expenses, salary excluded) is more than £50,000 from April 2026, more than £30,000 from April 2027 and more than £20,000 from April 2028. You then send quarterly updates from the software, due by 7 August, 7 November, 7 February and 7 May, and you still submit a tax return at the end of the year. Priya's £8,000 is well under, but £9,000 of sales plus £12,000 of rent would be inside from April 2028. A side hustle kept in software from the start is ready if it grows past the line.

Which accounting software suits a UK side hustle?

A low-cost plan that covers receipts, bank feeds and Self Assessment is enough for most side hustles. The four picks above all handle Self Assessment and Making Tax Digital for Income Tax in some form. Two start free, and FreeAgent is free with some business bank accounts. The live table ranks them by price at your own numbers; these are the rows that matter, read from our database.

Zoho Books' free plan is limited by revenue, and our calculator has no revenue input, so the table prices Zoho Books at £10/mo (Standard, annual) rather than its free plan. Pandle's free core plan has the bank feed and receipt capture; the table prices Pandle at £5/mo (Pro), because Pro is the plan that files VAT returns and Making Tax Digital for Income Tax. The table prices the other two at FreeAgent £19/mo (Sole Trader) and QuickBooks Online £16/mo (Simple Start). Every accounting provider we list, including the ones not picked here, is priced at your own numbers on the full comparison.

Do I need an accountant for a side hustle?

Not by law, and plenty of people file a simple return themselves. If you would rather hand it over, an accountant or tax adviser can prepare and file your Self Assessment. Bring tidy records from your software and they usually spend less time sorting paperwork, which often means a smaller fee and fewer missed expenses.

What an accountant charges is mostly for time, and the slow part of a side hustle return is rebuilding a year from bank statements and a bag of receipts. If the income, costs and receipts are already in software, the work is mostly checking. All four picks let you give an accountant their own access to your books: Zoho Books, FreeAgent and QuickBooks Online list that access as free, and Pandle provides it through its partner programme.

Before your first January bill: a checklist

1. Open a separate bank account for the hustle. Everything in and out goes through it.
2. Connect it to accounting software and let the bank feed bring in every sale and cost.
3. Snap every receipt the day you get it, and keep records for five years after the 31 January deadline.
4. Check your profit each month in the software, so you know roughly what the bill will be long before it arrives.
5. Register for Self Assessment as soon as your sales pass £1,000 in a tax year, and put 5 October, 30 December and 31 January in your calendar.
6. Check the Making Tax Digital thresholds each April against your gross side income plus any rent.

This is general information, not tax advice. Your position depends on your total income, where you live in the UK and what you sell, so check the pages below or ask an accountant before you file.

Sources

• Which?: HMRC crackdown: do you owe tax on Vinted or eBay income? (9 March 2025)
• Tax-free allowances on property and trading income, gov.uk
• Register for Self Assessment, gov.uk
• Boost for side hustlers as 300,000 people to be taken out of tax returns, gov.uk (11 March 2025)
• Selling goods or services on a digital platform, gov.uk
• Income Tax rates and Personal Allowances and Scottish Income Tax, gov.uk
• Self-employed National Insurance rates, gov.uk
• Payments on account and Pay through your tax code, gov.uk
• Check if you're eligible for Making Tax Digital for Income Tax and Work out your qualifying income, gov.uk
• How long to keep your records and Self Assessment penalties, gov.uk
• Repaying your student loan: what you pay, gov.uk
• HS227 Losses, gov.uk