If you work for an employer and also run a business on the side, you are both employed and self-employed. Your employer deals with tax on your salary through PAYE, but your business income is your own responsibility. This guide is general information, so check GOV.UK for your situation.
Do you need to file a return?
Usually yes, if your gross self-employed income is more than £1,000 in the tax year. Register for Self Assessment by 5 October after the end of that tax year. The £1,000 trading allowance can apply to small side income. See side hustle tax.
How the two incomes are taxed together
HMRC adds your employment income and your business profit to work out your total income, and applies your personal allowance once. It is normally used first against your salary, through your tax code, so the profit from the business is often taxed at your highest rate. For example, if your salary already uses up the personal allowance, business profit is taxed from the first pound.
National Insurance
- On your salary you pay Class 1 National Insurance through payroll.
- On your business profit you may pay Class 4 National Insurance through your tax return.
Paying the tax
Tax on your business profit is paid through Self Assessment on 31 January (and 31 July if payments on account apply). Alternatively, in some cases HMRC can collect a small balance through your tax code. Set money aside from each business payment. Use our tax calculator, which lets you enter other income.
What about Making Tax Digital?
Making Tax Digital for Income Tax is based on your qualifying income, which is your gross self-employment and property income. Salary is not counted. So a high salary with a small side business does not by itself bring you in. See the April 2027 changes.
Keep your records separate
- Use a separate bank account for the business.
- Record every sale and cost, and keep receipts.
- Keep your employment documents (P60, payslips) for the tax return.
Check with your employer
Read your contract: some employers restrict outside work or require you to tell them about it.
How AvrioBooks helps
Record your side business income and costs separately from your day job, and see your profit at any time. See AvrioBooks for freelancers and how to set up as a sole trader.
Frequently asked questions
Do I need to file a tax return if I have a job and a side business?
Usually yes, if your gross self-employed income is more than £1,000 in the tax year. Register for Self Assessment by 5 October after the end of that year.
Is my personal allowance used twice?
No. It is applied once across your total income, normally first against your salary.
Does salary count towards Making Tax Digital?
No. Qualifying income for Making Tax Digital is gross self-employment and property income, not salary.
What National Insurance do I pay?
Class 1 on your salary through payroll, and Class 4 on business profit through Self Assessment.
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