Got a side gig? Whether you’re flipping vintage finds on eBay, freelancing on Fiverr, or creating viral TikTok content, you could be earning extra cash. But did you know that even side hustle income may need to be taxed? Don’t stress! Here’s everything you need to know about your tax obligations and how to stay on the right side of HMRC.
- Do You Need to Pay Tax on Your Side Hustle?
Good news! If you earn £1,000 or less from self-employment in a tax year, you can benefit from the Trading Allowance. That means you don’t need to register or pay tax on this income. But if your earnings exceed £1,000, here’s what you must do:
- Register for Self Assessment with HMRC.
- Keep track of your income and expenses (more on this later!).
- File a tax return and pay what you owe.
Tip: Even if your income is under £1,000, it’s still smart to keep records in case HMRC asks for proof.
- How to Register for Self Assessment
If you cross the £1,000 threshold, you must register as self-employed. Don’t miss the deadlines:
- Deadline: 5th October following the end of the tax year in which you earned taxable income.
- How to register? Online via HMRC’s website.
- What you’ll get: A Unique Taxpayer Reference (UTR) number and instructions on filing your tax return.
Avoid penalties! If you miss the 31st January filing deadline, HMRC could fine you at least £100. Ouch!
- How Much Tax Will You Pay?
Here’s the breakdown:
- Income tax: If your total income (from employment + side hustle) is above £12,570, you start paying tax at 20% (or higher, depending on income level).
- National Insurance Contributions (NICs): If you earn more than £6,725, you may need to pay Class 2 NICs. Profits over £12,570? You may also owe Class 4 NICs.
Example: If you earn £20,000 from a full-time job and £5,000 from your side hustle, your total taxable income is £25,000. You’ll pay 20% tax on anything over £12,570.
Tip: Use HMRC’s tax calculator to estimate what you owe!
- What Expenses Can You Deduct?
Want to lower your tax bill? Deduct allowable expenses that are necessary for your business:
- Materials & supplies (e.g., craft materials, software subscriptions)
- Advertising & marketing (e.g., Facebook ads, website fees)
- Home office costs (a portion of rent, electricity, internet)
- Travel expenses (if related to your business, excluding commuting)
Pro tip: If you use your phone/laptop for both personal & business use, only claim the business-related portion.
- How Does HMRC View Your Side Hustle?
Selling Online (eBay, Etsy, Depop, Vinted)
- If you sell old personal items, it’s not taxable.
- If you buy and sell to make a profit, HMRC considers it a business, and you must report it.
Freelancing & Gig Economy (Fiverr, Upwork, Uber, Deliveroo)
- All self-employed income counts towards the £1,000 allowance.
- If you drive for Uber, deliver food, or offer services like writing or design, you’re trading and need to declare income.
Content Creators & Influencers (YouTube, TikTok, Instagram)
- Ad revenue, sponsorships, gifts, & collaborations = taxable income.
- Even freebies from brands may count as taxable (based on market value!).
Property Rental (Airbnb, Spare Room Rental)
- Earn under £1,000? No need to declare it.
- If renting out a room in your home, the Rent-a-Room Scheme lets you earn up to £7,500 tax-free!
- What Happens If You Don’t Declare Side Hustle Income?
Ignoring your tax obligations can lead to penalties and interest on unpaid tax.
- Missed filing deadline? Automatic £100 fine.
- Incorrect tax return? Possible investigation & penalties.
- Hiding income? HMRC can impose heavy fines or even legal action!
Be smart! If you think you made a mistake, contact HMRC ASAP to avoid harsher penalties.
- Tools to Keep You Organized
Managing taxes doesn’t have to be a headache! Use these tools to track income and expenses:
- Free HMRC Tax Calculator (to estimate tax owed)
- Accounting Software (QuickBooks, FreeAgent, Xero)
- Banking Apps (Monzo, Starling) to separate business income
- Spreadsheet (Google Sheets, Excel) for tracking manually
- Need Help? Get Free Support!
Not sure what to do? The UK government provides free guidance on tax obligations for side hustlers.
Visit Tax Help for Hustles for:
- Step-by-step registration guides.
- Info on tax rates and deadlines.
- Tips on tracking expenses and filing returns.
Final Takeaway: If your side hustle earns more than £1,000 a year, make sure you register, keep records, and file your tax return on time. Stay compliant, avoid fines, and keep your extra income stress-free!
SHARE THIS with fellow side hustlers to help them stay tax-savvy!