More people in the UK are turning to side hustles to boost their income, from freelancing and tutoring to reselling on eBay and creating content online. But once that money starts coming in, a question quickly follows: do you actually need to tell HMRC about it?
This guide breaks down everything you need to know about side hustle tax in the UK, including the £1,000 trading allowance, when you must register for self assessment, and what counts as taxable income.
What Counts as a Side Hustle for Tax Purposes?
A side hustle is any income you earn outside of your main job. HMRC may not use the term side hustle, but the rule is simple. If you are making money from an activity on a regular basis, that income could be taxable.
This can cover a wide range of work and income streams. Common examples include freelancing, consulting, tutoring, coaching, delivery driving, dog walking, pet sitting, and creating content on platforms such as YouTube, TikTok, or Instagram. It can also include selling goods online through websites like Etsy, eBay, or Amazon, as well as renting out a room or property on Airbnb.
In some cases, the difference comes down to intent and frequency. Selling personal items you no longer need is usually not treated as trading. However, if you regularly buy products with the aim of reselling them for a profit on platforms such as Vinted, Depop, or Facebook Marketplace, HMRC is more likely to view that activity as a trade.
The key point is that side hustle income is not limited to formal business setups. Even if it starts as a small project outside your main employment, it may still count for tax purposes. If the activity is ongoing and generates income, it is worth checking whether you may need to report it.
Is Side Hustle Income Taxable in the UK?
In short, yes. Most side hustle income is taxable. However, there is an important allowance that means many people will not owe a penny.
The £1,000 Trading Allowance
HMRC provides a £1,000 trading allowance for self-employed income each tax year. If your gross side hustle income is £1,000 or less, you do not need to pay tax on it and you do not need to declare it to HMRC.
Here is how it works in practice:
- Gross income at or below £1,000: No tax, no self assessment required.
- Gross income above £1,000: You must register for self assessment and declare it.
Importantly, the allowance applies to your gross income, not your profit. So if you earned £1,200 selling goods but spent £500 on stock, you still need to declare it because your gross income exceeded £1,000.
There is also a separate £1,000 property allowance if you earn rental income. These two allowances operate independently of each other, so you can benefit from both if applicable.
Do I Need to Declare Side Income to HMRC?
This is one of the most common questions we hear. The answer depends on how much you earned and the nature of the income.
You need to declare your side income to HMRC if:
- Your gross trading income from self-employment exceeds £1,000 in a tax year, regardless of your actual profit.
- You have other untaxed income alongside your main employment.
If you have a salaried job alongside a side hustle, your employer handles your income tax through PAYE. Your side income sits completely outside of that system. You are responsible for calculating and paying the tax on it yourself through self assessment.
It is also worth knowing that from January 2024, digital platforms such as Airbnb, Vinted, eBay, and Etsy are required to report UK sellers’ earnings directly to HMRC. The taxman now has more data than ever before. Our blog on new tax changes for Airbnb, eBay, and Vinted sellers covers these reporting rules in more detail.
When You Must Register for Self Assessment
Once your side hustle income exceeds the £1,000 trading allowance, you need to register for self assessment.
The key deadlines are:
- Registration deadline: 5 October following the end of the tax year in which you earned the income. For income earned in the 2024/25 tax year (ending 5 April 2025), you must register by 5 October 2025.
- Online filing deadline: 31 January following the end of the tax year.
- Paper filing deadline: 31 October following the end of the tax year.
You can register directly on HMRC’s self assessment portal. Missing the registration deadline can result in penalties, even if you end up owing no tax. Our complete self assessment tax return checklist is a useful resource when you are pulling your records together.
How Much Tax Will You Pay on a Self Assessment Side Hustle UK?
Once your gross income exceeds £1,000, you pay tax on your profits, not your total income. Profit is your income minus any allowable business expenses.
The income tax rates for the 2024/25 tax year are:
| Income Band | Tax Rate |
| Up to £12,570 (Personal Allowance) | 0% |
| £12,571 to £50,270 (Basic Rate) | 20% |
| £50,271 to £125,140 (Higher Rate) | 40% |
| Above £125,140 (Additional Rate) | 45% |
Your personal allowance applies to your total income, not just your side hustle. If your salary already uses your full £12,570 personal allowance, your side hustle profits will be taxed from the first pound.
National Insurance Contributions
If your self-employed profits exceed £12,570 per year, you will also pay Class 4 National Insurance Contributions (NICs). The current rate is 6% on profits between £12,570 and £50,270, and 2% on anything above that.
Class 2 NICs were abolished for most self-employed people from April 2024, which is a welcome simplification for lower-earning sole traders.
What Expenses Can You Deduct?
You can reduce your taxable profit by claiming allowable business expenses. These must be costs that are wholly and exclusively for your trade. Common examples include:
- Equipment and tools you use for the business
- Software subscriptions and online tools
- Marketing and advertising costs
- A proportion of your home office costs
- Stock, materials, and supplies
Keep receipts for everything you intend to claim. Without evidence, HMRC will not accept the deduction. Our bookkeeping services can help you track income and expenses throughout the year, so nothing slips through the net before your filing deadline.
Are You a Sole Trader?
If your side hustle is intentional and ongoing, you are likely operating as a sole trader. This means you should formally register as self-employed with HMRC. The process is straightforward and takes only a few minutes online.
You do not need to set up a limited company to run a side hustle. Most people start as sole traders, and many choose to stay that way. Our guide on the rules and requirements of being a sole trader explains what that means practically, including your obligations around record-keeping and tax.
If your side income starts to grow significantly, it may be worth considering whether a limited company structure would be more tax-efficient. That is a conversation worth having with an accountant sooner rather than later.
What Records Should You Keep?
Good record-keeping is a legal requirement, not just good practice. HMRC can request your records at any time, and you must retain them for at least five years after the relevant self assessment deadline.
At a minimum, you should keep:
- Records of all income received (invoices, bank statements, platform summaries).
- Receipts for all business expenses.
- Details of any assets purchased for the business.
- Records of allowances or reliefs you are claiming.
Using cloud-based accounting software makes this far easier to manage. As a Xero Platinum Partner, eAccounts can get you set up with Xero so your records stay accurate all year round, not just in the weeks before a deadline.
Common Mistakes Side Hustlers Make with Tax
When you are earning extra income on the side, it is easy to make small tax mistakes without realising it. Many side hustlers assume the rules only apply to larger businesses, but even modest earnings can create reporting and record-keeping obligations.
Here are some of the most common tax mistakes to watch out for:
- Assuming HMRC will not find out: Platform reporting rules introduced in 2024 mean HMRC now automatically receives data from dozens of platforms, including eBay, Vinted, Airbnb, and Etsy.
- Confusing turnover with profit: You are taxed on profit after allowable expenses, not total income. But your gross income still determines whether you need to register.
- Missing the October registration deadline: Many people wait until January to think about tax. If you needed to register by 5 October, you are already late and penalties may apply.
- Not keeping receipts: Without supporting evidence, you cannot claim expenses. Fewer deductions means a higher tax bill.
- Overlooking National Insurance: Side hustle profits can trigger Class 4 NICs as well as income tax. Both should be factored into your budget.
If any of these situations apply to you, our personal tax return service can help you get everything in order quickly and accurately, whether you are filing for the first time or catching up on a missed year.
Sort Your Side Hustle Tax with eAccounts
Side hustle tax in the UK can feel confusing at first, especially when you are balancing extra income with a full-time job or other responsibilities. The rules themselves are not overly complex, but it is still easy to miss a registration deadline, overlook allowable expenses, or misunderstand what needs to be reported. Getting your tax position sorted early can help you avoid unnecessary stress, penalties, and surprises later on.
Whether you are newly self-employed, freelancing on the side, or earning income through online platforms, having the right support can make the process much easier. eAccounts works with sole traders, freelancers, and small businesses across the UK every day, helping clients stay organised, compliant, and confident about their finances.
With fixed monthly pricing, a dedicated two-person eTeam, Xero included, and a 5.0-star Google rating from more than 1,000 clients, we offer practical support that fits around your business.
If you want expert help with your side hustle tax, eAccounts is here to help. Get a free quote today or book a free consultation to speak with one of our accountants about your situation.
FAQs
Do I need to tell HMRC about my side hustle?
Yes, if your gross side hustle income exceeds £1,000 in a tax year, you must register for self assessment and declare it to HMRC. If your income is at or below £1,000, the trading allowance covers it and you have nothing to declare.
What is the £1,000 trading allowance?
The trading allowance is a tax-free amount of £1,000 per year that applies to self-employed income. If your total gross trading income falls within this figure, you pay no tax on it and have no obligation to notify HMRC.
When do I need to register for self assessment for a side hustle?
You must register with HMRC by 5 October following the tax year in which your gross income exceeded £1,000. For the 2024/25 tax year, that means registering by 5 October 2025. Failing to register on time can result in a penalty.
Can I deduct expenses from my side hustle income?
Yes. Allowable business expenses reduce your income to arrive at your taxable profit. Expenses must be wholly and exclusively for your business. Always keep receipts and invoices as evidence.
What happens if I do not declare my side hustle income?
HMRC can charge penalties and interest on undeclared income. If the omission is considered deliberate, penalties can be substantial. It is always better to come forward voluntarily if you have missed a year rather than wait to be contacted.
