Self-employed on the side in Germany: what to watch out for alongside a job, studies or parental leave

What does “self-employed on the side” mean – and which limit applies to whom?

There is no law that defines “side occupation” (Nebenberuf) uniformly. For the tax office (Finanzamt) you are simply self-employed – whether or not you are also employed. The question “side or main occupation?” matters mainly for health insurance, unemployment benefit and parental allowance, and each authority has its own criteria.

So it is important not to decide by gut feeling (“it’s only on the side”) but to know the relevant limit for each area. The following overview sums them up.

Do I have to inform my employer?

A side activity is generally permitted, because freedom of occupation also applies to employees. However, many employment contracts and collective agreements contain a duty to notify: you must report the side activity in writing in advance. A blanket ban on any side activity is usually invalid; the employer may only object if their legitimate interests are affected.

Legitimate reasons are mainly: you work for the competition or poach clients, the side activity impairs your work performance (too little rest, exhaustion), or you work during holidays or sick leave in a way that conflicts with recovery. Stricter rules with a duty to notify or obtain approval under the relevant civil service law apply to civil servants (Beamte) and many public sector employees.

• Check your employment contract and any collective agreement for a “side activity” (Nebentätigkeit) clause.
• Briefly describe the activity, its scope (hours per week) and sector in writing and – if necessary – report it before you start.
• Do not accept jobs from your employer’s clients or competitors without clarifying this first.
• Do not use your employer’s equipment (laptop, software licences) for your own activity.
• During parental leave (Elternzeit) you expressly need your employer’s consent for self-employment (§ 15 Abs. 4 BEEG); they can only refuse within four weeks for urgent operational reasons.

Registration: the same steps as for any start-up

Even if you only start on the side, you go through the normal registration. Whether you register a trade or, as a freelancer, go straight to the tax office depends on the activity – the differences are explained in the guide freelancer (Freiberufler) or trade business (Gewerbe).

• Trade businesses: register a trade (Gewerbeanmeldung) at the trade office (fee usually €15–65); on the form you tick “Nebenerwerb” (secondary occupation).
• Everyone: submit the tax registration questionnaire (Fragebogen zur steuerlichen Erfassung) via Mein ELSTER within one month of starting. There you also choose the small business scheme and estimate revenue and profit.
• The tax office assigns you a separate tax number (Steuernummer) for your self-employment; your tax ID stays the same.
• A separate business account is not mandatory for sole traders, but it makes bookkeeping alongside your salary account much clearer.

Taxes: Anlage N plus EÜR – how your side income is taxed

As soon as you make more than €410 profit a year on the side, you must file an income tax return (mandatory assessment under § 46 Abs. 2 Nr. 1 EStG). You enter your salary in Anlage N as before, and the profit from self-employment in Anlage S (freelancers) or Anlage G (trade business). It is determined with the cash-basis profit statement (EÜR), which you submit electronically via ELSTER.

The profit is added to your other income. Because wage tax has already been withheld from your salary, the additional profit is taxed in full at your marginal rate – which quickly reaches 25–35 % with an employee’s salary. No wage tax is deducted from the side profit; the tax comes as an additional payment with the assessment. From an expected annual tax of €400 the tax office can also set income tax prepayments.

Example (single assessment, 2026 tax scale, without Soli and church tax): Anja earns enough as an employee for her taxable income to be €35,000. On the side she earns €11,000 as a graphic designer and has €3,000 in business expenses – profit €8,000.

Hardship allowance: tax-free up to €410, reduced up to €820

Employees with small secondary income benefit from the hardship allowance (Härteausgleich, § 46 Abs. 3 EStG and § 70 EStDV). What counts is profit, i.e. income minus business expenses – not revenue. If your secondary income (all income other than wages combined, including e.g. rental income) is at most €410, it remains completely tax-free. Between €410 and €820 a sliding amount is deducted: €820 minus secondary income.

The hardship allowance is not a general allowance for the self-employed: it only applies if you receive wages and have income from employment. Married couples assessed jointly receive it only once, not twice.

VAT, small business scheme and trade tax for a side business

For VAT only the revenue from your business activity counts, not your salary. If your net revenue was at most €25,000 in the previous year and is at most €100,000 in the current year, you can use the small business scheme (Kleinunternehmerregelung): no VAT on invoices, no VAT returns. In the first year the €25,000 limit applies to the current year (no extrapolation if you start during the year). Several activities – such as photography and a small online shop – are added together.

Is opting out worthwhile? If your clients are mainly businesses and you invest at the start (camera, laptop), standard taxation with input VAT deduction can be cheaper; the decision then binds you for five years. Since 2025 you must be able to receive e-invoices even as a small business, and your invoices need a note about the tax exemption.

For sole traders, trade tax is only due once trade income exceeds the allowance of €24,500 – which is rare for a side business. Freelancers pay no trade tax at all.

Health and pension insurance: does everything stay the same?

As an employee with compulsory insurance you do not pay additional health insurance contributions on your side profit as long as the self-employment is a side occupation. The health insurance funds check whether the self-employed activity clearly exceeds the employment in terms of time and economic importance. According to their joint principles it is presumed not to be a main occupation if you are employed more than 20 hours a week and your earnings are above half the reference value (Bezugsgröße, 2026: €1,977.50 a month). Still, report the self-employment to your fund; it decides case by case.

Voluntarily insured members of the statutory scheme (salary above the compulsory insurance threshold), on the other hand, pay contributions on all income, including profit. Privately insured people pay contributions regardless of income. In the pension insurance you are usually not compulsorily insured as someone self-employed on the side – exceptions are e.g. teachers, carers and employee-like self-employed people with a single client, once profit exceeds €603 a month (more in the guide bogus self-employment (Scheinselbstständigkeit)).

Self-employed during parental leave, unemployment or studies

Parental leave and parental allowance: while you receive parental allowance (Elterngeld) you may work up to 32 hours a week on monthly average. Profit from self-employment after the birth is offset against parental allowance and reduces it. If you are employed, you need your employer’s consent for self-employment during parental leave.

Unemployment benefit I (Arbeitslosengeld I): you only remain unemployed if your self-employment amounts to less than 15 hours a week. Of the secondary income (after taxes, contributions and business expenses) €165 a month is not offset, the rest is deducted. If you already carried out the activity alongside your employment for at least twelve months in the 18 months before becoming unemployed, a higher allowance may apply. Report every activity to the employment agency (Agentur für Arbeit) in advance.

Start-up grant (Gründungszuschuss): if you want to start a full-time business out of unemployment, the employment agency can grant a start-up grant (a discretionary benefit). Requirements include a remaining entitlement of at least 150 days of unemployment benefit and a viability certificate (Tragfähigkeitsbescheinigung), e.g. from the IHK or a tax advisor.

Studies: during the semester try to stay at no more than 20 hours a week, otherwise you lose the cheap student health insurance. Profits from self-employment also count as income for BAföG.

From side business to main business: what changes when you switch

Many start on the side and switch once the work is sustainable. There is no fixed cut-off date; what matters is when the self-employment predominates in time and money – at the latest when you quit your job or reduce hours. Plan these points in good time:

• Inform your health insurance fund: as a self-employed person in your main occupation you become voluntarily insured and pay the full contribution yourself – at least on €1,318.33 a month (minimum assessment basis 2026). Details in the guide health insurance for the self-employed.
• Inform the tax office if your profit increases significantly, so that the prepayments fit – otherwise you risk a large additional payment all at once.
• Keep an eye on the small business limit: if revenue rises above €25,000, you are subject to standard taxation from the following year, above €100,000 immediately.
• Rethink your retirement provision: without an employer, statutory pension insurance usually no longer applies – read the guide retirement provision for the self-employed.
• Set aside taxes: with the guide building tax reserves you allocate income tax, VAT and, if applicable, trade tax correctly.

Self-employed on the side with KontoVexa

KontoVexa keeps your self-employment separate from your salary: you write invoices with all mandatory details, record expenses with a photo of the receipt and at year end get the EÜR, which you send directly to ELSTER (Business/Pro plans). If you have several side activities, such as a freelance one and a trade business, you run them as separate businesses with separate EÜRs. KontoVexa does not create Anlage N or the main form of the income tax return; you file those yourself as usual. More about bookkeeping for freelancers and side businesses.

Frequently asked questions