Side Hustles and Benefits in the UK: What You Need to Know
Starting a Side Hustle While on Benefits – Is It Worth It?
For many people, a side hustle is a way to make extra money, develop new skills, or even take the first steps toward financial independence.
But if you’re receiving government benefits, it’s natural to wonder: How will this affect my payments?
In this guide, we break down how different UK benefits respond to side income, what counts as “profit,” and how to report it properly—plus real-life examples to show how others are navigating the system.
Disclaimer
This guide is for general information only and is not a substitute for personal advice.
Benefit rules can change, and your circumstances may affect how income is assessed.
We recommend using a benefits calculator like Turn2Us or contacting Citizens Advice or your local council for tailored guidance.
Which UK Benefits Are Affected by Side Hustles?
1. Universal Credit (UC)
Universal Credit is means-tested, so any self-employed income must be reported monthly.
You’ll be asked to report your profit (income minus allowable expenses), and your payment may be reduced depending on how much you earn.
Key points:
Work Allowance (2025/26):
£404/month (if you get housing support)
£673/month (if you don’t)
Income over this is reduced at a 55% taper rate
If you’re considered gainfully self-employed, the Minimum Income Floor (MIF) may apply, assuming you earn the equivalent of full-time minimum wage
2. Working Tax Credit / Child Tax Credit
Although Tax Credits are being replaced by Universal Credit, some people are still on the legacy system.
Key points:
HMRC expects your business to be regular and commercial—not just a hobby
You must work at least 16–30 hours/week (depending on your situation)
You’ll need to report if your annual income changes by more than £2,500
3. Employment and Support Allowance (ESA)
For those on income-related ESA, limited self-employment may be allowed under the Permitted Work rules.
Key points:
You can work less than 16 hours/week
You can earn up to £167/week (2025/26) without affecting your ESA
You must fill out a PW1 form before you start
4. Jobseeker’s Allowance (JSA)
If you're still on JSA (legacy benefit), self-employment income will reduce your payments directly.
Key points:
The first £20/week is ignored
After that, your JSA is reduced £1 for every £1 earned
You must still actively seek work
5. Housing Benefit & Council Tax Support
If you're not on UC yet, these may be claimed separately through your local council.
Key points:
Profits after expenses are assessed
Benefit amounts usually reduce on a sliding scale, but this varies between local councils
Always report changes in income promptly to avoid overpayment
Real-Life Examples of Side Hustles on Benefits
🧁 Chloe – Single Mum Selling Cakes (Universal Credit)
Chloe receives UC and lives with her two children. She starts baking custom cakes and earns £400/month profit.
As she receives housing support, her work allowance is £404
Since her profit is below the allowance, her UC is unlikely to be reduced that month
In a future month, she earns £600:
£600 - £404 = £196
£196 × 55% = £107.80 UC deduction
👉 Chloe starts tracking her monthly profit and keeps a savings buffer to manage any payment changes.
🛠️ Jay – Handyman Doing Permitted Work (ESA)
Jay receives income-related ESA and starts offering odd jobs like painting and fence repairs.
He earns £120/week, working 10 hours
This is under the £167/week threshold and qualifies as Permitted Work
He submits a PW1 form and retains his full ESA
👉 Jay gradually rebuilds confidence and income without losing vital support.
🧶 Sandra – Crochet Seller on Etsy (Tax Credits)
Sandra is a part-time teaching assistant who also receives Working Tax Credit. She starts selling handmade crochet goods on Etsy and makes £1,200 in profit in her first year.
She combines 20 employed hours with 10+ hours on her business
This meets the 30-hour eligibility rule for WTC
She declares her income during her annual Tax Credit renewal
She also monitors for any income increases above the £2,500 reporting threshold
👉 Sandra keeps detailed records and continues receiving support while growing her side hustle.
🎤 Craig – DJing Gigs (JSA + Housing Benefit)
Craig is on JSA and Housing Benefit and occasionally DJs at weddings. He makes £160 in one week from two gigs.
The first £20 is ignored, but the remaining £140 reduces his JSA pound-for-pound
His Housing Benefit may also reduce, depending on how his local council calculates entitlement
👉 Craig looks into switching to Universal Credit, which has a more flexible taper system—but uses a benefits calculator first to make sure it’s the right move.
🪴 Aisha – Instagram Plant Shop (Universal Credit)
Aisha is a graduate receiving UC while job hunting. She starts selling houseplants on Instagram, making £250/month profit.
She doesn’t receive housing support, so her work allowance is £673
Her profit is well under the threshold, so her UC payment remains unchanged
She still reports her income each month to stay compliant
👉 Aisha uses her side hustle to build a portfolio while keeping her benefit entitlement secure.
What Counts as “Profit”?
Profit = Total Income – Allowable Business Expenses
Allowable expenses might include:
Materials or stock
Postage or packaging
Business-related travel
Phone/internet (proportional use)
Marketing or website costs
❌ Personal costs (like clothes, lunches, or childcare) are not allowable.
Tips for Managing a Side Hustle While on Benefits
✅ Track everything – Use a simple spreadsheet or one of our digital templates
✅ Report monthly – Especially for UC, even if you make no profit
✅ Start slow – Keep profits low and consistent while you find your footing
✅ Speak to an adviser – Especially before making major changes like switching to UC
✅ Save for reductions – Build a buffer in case your benefit is reduced
FAQs
Do I have to report my income every month on Universal Credit?
Yes – even if you don’t earn anything. Reporting is monthly via your online UC journal.
Can I still claim benefits if my side hustle loses money?
Yes – you still report it, and a loss might reduce your income for that month. But losses don’t carry forward under UC.
Will my benefits stop if I make too much money?
They may reduce, but not stop immediately. UC, for example, reduces gradually above the work allowance.
Can I work cash-in-hand if I report it?
Yes – as long as you declare all income. Unreported earnings count as benefit fraud.
Final Thoughts
Starting a side hustle while on benefits is possible—and for many people, it’s a first step toward greater financial stability.
With careful tracking, honest reporting, and a clear understanding of how profits affect your entitlements, you can grow your business and stay compliant.
