Side Hustle Tax Guide UK

The £1,000 Trading Allowance

If your total gross income from self-employment or a side hustle is £1,000 or less per tax year, you do not need to tell HMRC or pay any tax. This is the trading allowance. Income above £1,000 must be declared via Self Assessment. You can choose to use the allowance instead of deducting actual expenses — whichever gives a better result.

"Income above £1,000 must be declared via Self Assessment"

When to Register as Self-Employed

You must register with HMRC as self-employed if your side income exceeds £1,000 in a tax year. Register by 5 October following the end of the tax year you first had self-employment income. You can register online at gov.uk. Failing to register on time results in penalties — but HMRC is generally understanding if you contact them proactively.

What Counts as a Side Hustle?

Taxable side income includes: freelancing or consulting, selling goods online (eBay, Etsy, Vinted — if trading regularly, not just clearing personal items), renting a room or property, tutoring, delivery driving (Uber Eats, Deliveroo), creating content (YouTube, OnlyFans, Substack), and providing services like cleaning, gardening, or dog walking.

Allowable Expenses You Can Deduct

You only pay tax on profit, not turnover. Deductible expenses include: equipment and tools used for the business, marketing and website costs, business insurance, professional subscriptions, accountancy fees, a proportion of your home costs if you work from home, business mileage (45p/mile for first 10,000), phone and internet (business proportion), and any other genuine business cost.

Employed AND Self-Employed

Having a job and a side hustle simultaneously is very common. Your employment income is taxed via PAYE as normal. Your side hustle profit is added to your total income and taxed at your marginal rate. You may owe NI (Class 4) on self-employed profits above £12,570. You need to file a Self Assessment return and can pay the tax owed by 31 January.

VAT and Side Hustles

You only need to register for VAT if your VAT-taxable turnover exceeds £90,000 in any 12-month period (2025/26 threshold). Most side hustles will not reach this level. If you do register, you charge VAT to customers and reclaim VAT on business purchases. Some side hustles are VAT-exempt (certain financial services, education) or zero-rated (most food, children's clothing).

Selling Online — HMRC Reporting Rules

From January 2024, digital platforms like eBay, Etsy, Airbnb, and Fiverr are required to report seller earnings to HMRC. This does not create new tax obligations — it just means HMRC can see your income. If you sell personal items occasionally, no tax is due. Regular trading above £1,000/year has always been taxable and must be declared.

"From January 2024, digital platforms like eBay, Etsy, Airbnb, and Fiverr are required to report seller earnings to HMRC"

Keeping Records

Keep records of all income and expenses for your side hustle for at least 5 years after the Self Assessment filing deadline. A simple spreadsheet works fine — or use free tools like Wave, or paid options like QuickBooks or FreeAgent. Keep receipts digitally. Good records mean you claim everything you are entitled to and can demonstrate your figures if HMRC ever queries them.