What It Actually Costs to Get Paid for a Side Hustle

This article has been published as part of an advertising collaboration.

A side hustle can look like easy extra money until the first payout lands and it’s a few pounds short of what you expected. Selling knitted hats on a marketplace, tutoring at weekends or driving for a delivery app can all bring in extra income, but there can also be fees sitting between the sale and your bank balance.

It’s easy to budget for the work and forget to budget for the behind the scenes processes that actually moves the cash from your customer to your bank account.

That transactional route is rarely visible, but that marketplace app doesn’t hand you cash on the spot; payments can pass through processors, fraud checks and currency conversion before funds are released to your account, and behind some of those apps sit specialist providers such as Finteq Hub, which connect businesses to multiple payment providers and payment methods including cards, bank transfers and open banking.

As a seller, you may never see the provider’s name, but the systems behind the app still affect how your payment moves from the customer to you.

Important: This article provides general information rather than personal tax or financial advice. Tax rules and payment-provider fees can change, so check the linked official information where it affects your own circumstances.

Where the Money Actually Leaks

Card payments can be one of the biggest costs involved in getting paid. For a small UK business, processing costs can often sit somewhere around 1.5% to 3.5% of the transaction depending on the provider, card and pricing model, while some services also add a fixed fee.

On a £40 tutoring session, a 3.5% transaction fee alone would take £1.40 before tax or any other business costs are considered, which can make a different overall when you factor in the number of those £1.40's that you can't spend, over the course of your financial year.

Every payment method has a different cost structure, so it’s worth looking beyond the first percentage shown on a pricing page. PayPal's UK merchant fees, for example, currently list 2.9% plus a 30p fixed fee for its standard domestic commercial transaction category, while other PayPal payment types have different charges. Some card-terminal providers also charge monthly rental or subscription fees, while others work on a pay-as-you-go basis.

The fee that matters is the one attached to the type of payment you actually take, because someone selling £5 products at a market stall may care more about fixed transaction charges, while a freelancer invoicing £500 at a time is likely to notice the percentage fee much more.

Currency Conversion and Hidden Rates

Currency conversion is another cost that side hustlers can easily miss. Picture a graphic designer in Leeds selling an €80 logo pack to a client in Munich: if the payment route effectively costs 3% to convert that money, that’s €2.40 gone before any other charges are considered. Repeat that ten times a month and the difference is €24, so international work can make currency costs worth checking properly before you commit to getting into selling your products internationally, especially for lower margin product ranges.

The conversion cost won’t always appear in exactly the same way. A provider may charge a separate conversion percentage, use an exchange rate containing its own margin, or apply extra charges to an international transaction. Check the amount your client pays against the amount that finally reaches you in pounds rather than looking at one fee in isolation, to make sure you know how much of that sale is going to a third party.

Bank Transfers and Card Rails

Direct UK bank transfers often use Faster Payments, and where both banks participate directly, the money is normally available almost immediately, although it can sometimes take up to two hours and some payments can take longer.

That can make bank transfer attractive for freelancers or other side hustlers working with regular clients because you may avoid a separate card-processing charge. It isn’t identical to accepting a card, though, and once a Faster Payment has been sent it can’t simply be cancelled, although banks have procedures for trying to recover money sent in error.

Some customers may also prefer paying by card, so the cheapest method for you isn’t automatically the most convenient way for them to pay.

A rough comparison looks like this:

Higher-volume businesses can sometimes access different pricing or negotiate a rate based on what they process. A small side hustle is more likely to be using the standard published pricing, which makes it useful to run the fees against your actual average sale rather than comparing percentages in isolation.

Invoicing and Freelance Apps

Freelancers billing clients directly face another variation on the same problem. Some invoicing platforms let you create and send an invoice without charging for that part, then take a fee when the client uses the platform’s built-in card checkout. If your client is happy to pay directly into your bank account instead, you may be able to avoid that card-processing fee.

That doesn’t mean you should automatically remove card payments. Making it difficult for a customer to pay you can cost more than the fee you were trying to avoid, particularly with a new client. Give people a sensible payment option, know what it costs you and build those charges into the price of doing the work.

The Part That Often Gets Left Until Tax Return Time

Fees are only half the cost story; the other half is record-keeping. If your annual gross trading income is more than £1,000, you generally need to register for Self Assessment and declare the income to HMRC.

Gross income means the amount before your expenses are deducted, so a marketplace or payment fee doesn’t reduce the income used for that £1,000 test.

If you calculate your taxable profit using actual business expenses, some business-related financial charges can count as allowable expenses. HMRC includes costs such as bank and credit-card charges among the financial costs that can potentially be claimed, but you can’t claim actual business expenses as well as using the £1,000 trading allowance to calculate the same trading profit.

My guide to side hustle tax and Self Assessment explains the £1,000 trading allowance and registration rules in more detail.

A simple monthly habit can make this much easier. Export the platform’s payment statement, keep a record of the gross income and fees, and save anything you may need later rather than trying to reconstruct a year of transactions when your return is due.

The side hustle itself might only take a few hours a week, but knowing what you earned before and after fees tells you whether it’s actually paying as well as you thought.

Frequently Asked Questions

What fees can reduce side hustle income?

Payment processing charges, marketplace fees, digital-wallet fees and currency conversion can all reduce the amount that reaches your bank account. The exact costs depend on the service you use and how your customer pays.

How much do card payment processing fees cost?

There isn’t one standard fee for every provider. Small-business card processing can commonly cost around 1.5% to 3.5% of a transaction, although fixed charges, card type, international payments and monthly fees can change the total cost.

How much does PayPal charge for a business payment?

PayPal currently lists 2.9% plus a 30p fixed fee for its standard domestic commercial transaction category when receiving pounds. Other PayPal payment types and international transactions can have different charges.

Are bank transfers cheaper than card payments?

They can be because a direct bank transfer may avoid a card-processing fee, although your bank or platform can still have its own charges. Bank transfers and card payments also have different processes when something goes wrong, so cost isn’t the only thing to compare.

Do I need to declare side hustle income over £1,000?

If your annual gross trading income is more than £1,000, you generally need to register for Self Assessment and declare it to HMRC. The £1,000 threshold is based on gross income before business expenses are deducted.

Can I deduct payment fees from side hustle income for tax?

Some business-related financial charges can potentially be allowable expenses when you calculate your profit using actual expenses. You generally can’t claim those actual expenses as well as using the £1,000 trading allowance to calculate the same trading profit.