Last updated: 14 October 2026
How do you file taxes for freelance income while employed?
Your salary is taxed through PAYE, but your freelance income isn’t, so you report it through Self Assessment. Register as self-employed by 5 October after the end of the tax year you started, then file an online return by 31 January, including your employment income from your P60 and your freelance profit. If your gross freelance income is £1,000 or less in the tax year, the trading allowance covers it and you don’t need to register just for that. Your salary uses your Personal Allowance first, so freelance profit is usually taxed at 20% or 40%.
Steps to follow
- Keep records of freelance income and expenses from day one
2. Register for Self Assessment and Class 4 NIC online
3. Get your Unique Taxpayer Reference (UTR) by post or in the app
4. File your return by 31 January, using your P60 for the PAYE figures
5. Pay the balance and any payments on account
How the tax adds up in 2026/27
| Salary | Freelance profit | Tax on freelance profit | Class 4 NIC |
| £30,000 | £8,000 | £1,600 (20%) | None |
| £48,000 | £10,000 | £3,546 (£2,270 at 20%, £7,730 at 40%) | None |
| £60,000 | £5,000 | £2,000 (40%) | None |
| £35,000 | £20,000 | £4,946 (£15,270 at 20%, £4,730 at 40%) | £445.80 |
Class 4 NIC is worked out on your trading profits alone, not added to your salary. It’s 6% on profits between £12,570 and £50,270 and 2% above, so many people with modest side income pay none.
Paying through your tax code
If you owe less than £3,000 and file online by 30 December, you can ask HMRC to collect the tax through your PAYE code over the next year. This avoids a lump sum and can stop payments on account.
Example
Amira works full-time as a marketing manager on £40,000 and designs websites in the evenings. In 2026/27, she earns £12,000 from clients and spends £2,000 on software and a new laptop. Her profit is £10,000. Her salary uses her Personal Allowance and £27,430 of the basic rate band, leaving £10,270, so her whole profit is taxed at 20%: £2,000 tax. Her profit is below £12,570, so there’s no Class 4 NIC. She’ll make payments on account for 2027/28 unless more than 80% of her tax is deducted through PAYE.
Check your employment contract
Some employers restrict outside work or require you to declare it. Freelancing for your employer’s clients can create a conflict of interest.
Making Tax Digital
From April 2026, MTD for Income Tax applies to qualifying self-employed and property income over £50,000, falling to £30,000 from April 2027. Salary doesn’t count towards the threshold.
Common mistakes
- Assuming PAYE covers side income
- Missing the 5 October registration deadline
- Claiming the trading allowance and expenses at the same time
- Forgetting the first-year payments on account
Frequently asked questions
Do I need a separate bank account?
Not required, but recommended.
Can I offset a freelance loss against my salary?
Yes, sideways loss relief may apply, subject to limits.
Do platform earnings count?
Yes.
Do I pay Class 2 NIC?
No.
Related: revenue from a new consulting business, planning for tax when going freelance and whether you need a tax return.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with side income tax returns. See our sole trader accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
