Will I be effected by HMRCs 'side hustle' tax?

14 January 2025

With the rise of side hustles in the UK, many individuals are earning extra income through freelancing, selling goods, or gig economy work. While this can be a great way to boost your finances, it’s important to understand your tax obligations.

When Do I Need to File a Tax Return?

In the UK, you must file a Self Assessment tax return if you earn more than £1,000 from self-employment in a tax year. This threshold is known as the Trading Allowance and applies to any income earned outside of your main employment or other taxed income.

If your side hustle income exceeds £1,000, you’ll need to register with HMRC as self-employed and submit a tax return, even if you’re also employed full-time.

What Counts as Side Hustle Income?

Any money earned outside your primary job, such as freelance work, selling goods online, or offering services like tutoring, is taxable income. Even if you don’t receive formal invoices or pay slips, it’s still your responsibility to report these earnings.

Key Steps to Stay Compliant

• Register with HMRC: If your side hustle income exceeds £1,000, you must register for Self Assessment by the 5th October following the tax year in which you started.
• Track Income and Expenses: Keep detailed records of earnings and any allowable expenses, such as materials, travel, or equipment.
• Pay Taxes and National Insurance: You may be required to pay both Income Tax and Class 2 or Class 4 National Insurance contributions, depending on your profit.

Failing to declare side hustle income can result in penalties from HMRC. Staying organised and proactive ensures you remain compliant while making the most of your earnings. If in doubt, speak to one of our tax professionals for tailored advice.