From selling products online and creating content to freelancing at weekends, side hustles have become an increasingly common way for people in the UK to earn extra money.
But at what point does a side hustle become something you need to tell HMRC about?
HMRC has launched a new summer campaign reminding people earning additional income that they may have tax and reporting obligations.
The campaign specifically highlights people making money from areas such as wedding services, online selling, content creation and freelancing.
For anyone earning money outside their main job, now is a good time to check whether that additional income needs to be reported.
How much can you earn from a side hustle before telling HMRC?
One of the most important figures to understand is the £1,000 trading allowance.
If your gross trading income is £1,000 or less during a tax year, you may be able to use the trading allowance and, in many straightforward cases, won’t need to tell HMRC about that income.
However, if your gross trading income exceeds £1,000, you may need to register for Self Assessment and report your income.
Importantly, the £1,000 threshold relates to income before expenses, not simply the profit you make.
For example, if you receive £1,500 from a side business but spend £800 on materials, your profit may only be £700. However, your gross trading income is still £1,500, so you shouldn’t assume you’re below the threshold.
Whether you actually have tax to pay will depend on your circumstances, including your income, allowable expenses and how the trading allowance applies.
Do you have to pay tax on a side hustle?
Potentially – but earning more than £1,000 doesn’t automatically mean you’ll have a tax bill.
Your overall tax position depends on factors including how much profit your side hustle makes and what other income you receive.
The important distinction is between having an obligation to report income and actually owing additional tax.
If you’re employed and also earn money from a side business, for example, your salary and other income can affect how much tax is ultimately due.
Does HMRC know about income from online platforms?
HMRC increasingly receives information from digital platforms and marketplaces.
That means information held by online selling and gig-economy platforms can potentially be compared with information reported to HMRC.
This has caused some confusion, particularly around whether simply selling items through platforms such as Vinted or eBay automatically creates a tax liability.
It doesn’t.
The underlying tax rules are what matter.
Do you have to pay tax when selling on Vinted or eBay?
If you’re simply clearing out your wardrobe or selling unwanted possessions from around your home, you are not necessarily trading.
For example, selling an old coat, children’s clothes or furniture you no longer need is very different from deliberately purchasing products with the intention of reselling them for profit.
The nature and pattern of your activity matters.
If you’re regularly buying products to resell, making products specifically to sell or operating your online activity like a business, HMRC may regard you as trading.
In that situation, the normal rules surrounding trading income and the £1,000 trading allowance become relevant.
What counts as a side hustle?
A side hustle can take many forms.
You could potentially be trading if you regularly earn money from activities such as:
- Freelance work
- Social media and content creation
- Photography or videography
- Wedding services
- Tutoring
- Beauty treatments
- Selling handmade products
- Buying and reselling products
- Consulting
- Graphic design or marketing
- Gig-economy work
- Other paid services alongside your main employment
The fact that you consider something a hobby doesn’t necessarily determine its tax treatment.
If you’re regularly providing goods or services in return for payment, it’s worth checking your position.
Do influencers and content creators need to declare income?
Content creators, influencers and people earning money through social media should pay particular attention to their tax position.
Income can come from multiple sources, including sponsorships, brand partnerships, advertising, affiliate commissions and platform payments.
Having lots of relatively small income streams can make it surprisingly easy to lose track of how much you’ve earned during a tax year.
Good bookkeeping is therefore valuable even when a side hustle is still relatively small.
Keeping records from the beginning is much easier than trying to reconstruct a year’s worth of transactions when a tax deadline approaches.
What should you do if your side hustle earns more than £1,000?
Don’t panic.
Crossing the £1,000 gross income threshold doesn’t mean HMRC is suddenly going to send you a large tax bill.
Instead, it’s a prompt to check whether you need to register for Self Assessment and understand what information needs to be reported.
A sensible starting point is to:
- Add up your gross income from relevant trading activities.
- Keep records of payments received and business expenses.
- Check whether you need to register for Self Assessment.
- Understand whether claiming actual allowable expenses or using the trading allowance is appropriate.
- Put money aside for tax if you expect to have a liability.
The earlier you understand your position, the easier it generally is to manage.
What if you haven’t declared previous side hustle income?
If you think you should have reported income to HMRC in an earlier tax year but didn’t, ignoring it is unlikely to make the situation easier.
Coming forward voluntarily can generally put you in a better position than waiting for HMRC to identify a discrepancy and open an enquiry.
Exactly how you should correct the position will depend on the circumstances and the tax years involved.
It’s therefore worth getting professional advice before making a disclosure, particularly where the income is substantial or covers several years.
Don’t let your side hustle create a tax headache
Starting a side hustle should be exciting.
The tax side doesn’t need to make it complicated.
The easiest approach is to treat your finances properly from the beginning: keep records, separate business transactions where practical, understand the £1,000 trading allowance and check your Self Assessment obligations as your income grows.
At A&C Chartered Accountants, we work with start-ups, sole traders, freelancers, content creators and small businesses across Manchester and the UK.
Whether your side hustle has just crossed the £1,000 threshold or has developed into a growing business, we can help you understand your tax obligations and make sure everything is reported correctly.
Need help with your side hustle tax? Get in touch with A&C Chartered Accountants and we’ll help you understand what you need to do next.
This article provides general information only and does not constitute tax advice. Tax treatment depends on individual circumstances and tax rules can change. Professional advice should be obtained where appropriate.