Side hustles have exploded across the UK, with 39% of Brits now earning money from additional income streams alongside their main jobs.
The numbers are staggering, with the average side hustler earning some £914 per month, adding nearly £11,000 to their annual income, while top earners bring in over £100,000 yearly from their ventures.
Whether you’re selling vintage finds on Vinted, delivering meals through Uber Eats, or building a thriving Etsy business, that extra income hasn’t escaped HMRC’s attention.
With side hustles contributing an estimated £70 billion to the UK economy annually and 47% of people expected to have one by the end of 2025, the government has introduced new reporting requirements and announced upcoming changes to tax thresholds.
If you’re earning money outside your main job, understanding when and how tax rules apply to your side hustle isn’t just good practice – it’s essential for staying compliant and avoiding penalties.
How HMRC Treats Side Hustles
The main rule here is quite simple. Currently, if you earn more than £1,000 in total from all your side hustle activities in a tax year, you must register as self-employed and complete a tax return. This applies to your gross income before expenses, not your profit after costs.
The £1,000 threshold covers all your trading activities combined. If you earn £600 from selling clothes online, £300 from tutoring, and £400 from freelance work, your total of £1,300 exceeds the threshold.
In a bid to clamp down on tax avoidance from side hustlers, platforms including eBay, Vinted, Etsy, Airbnb, and Uber now automatically share seller information with HMRC.
you exceed certain thresholds – making more than 30 transactions or earning over €2,000 (approximately £1,700) in a calendar year – the platform reports your total income, transaction count, and personal details directly to HMRC.
This means HMRC now has unprecedented visibility into side hustle earnings. They can cross-reference platform data with tax returns to identify people who haven’t declared their income properly.
The government has invested £39.9 million in tracking down undeclared side hustle income, including a specialist team dedicated to spotting discrepancies.
It’s incredibly easy to surpass that threshold. Selling just £200 a month on eBay would do it.
Even if you’re selling your own items not for business purposes, HMRC won’t know that unless you tell them. Be aware that selling your old possessions doesn’t typically count as ‘trading’ – so while you can’t say for certain that HMRC turns a blind eye to some situations – some people with significant undeclared earnings are likely to be the top targets.
Major Changes Coming by 2029
The ITSA trading income reporting threshold will increase from £1,000 to £3,000 gross within this parliament, as announced in March 2025. This will benefit around 300,000 taxpayers, with an estimated 90,000 having no tax to pay at all.
However, this creates a split system:
- Earnings under £1,000: Completely tax-free with no reporting requirements, exactly as today.
- Earnings between £1,000 and £3,000: Tax may still be owed, but you’ll use a new simplified online service instead of completing a full self-assessment.
- Earnings over £3,000: Full self-assessment requirements continue as normal.
Crucially, this change only affects how you report income to HMRC, not the amount of tax you pay. The £1,000 trading allowance, which provides tax-free income, remains unchanged.
It’s potentially a long way off, but keep an eye out for it if you’re a borderline self-assessment taxpayer hovering around the £1,000 threshold.
Common Side Hustle Scenarios
First, let’s reiterate that self employment covers a broad spectrum of trading activity, from being a landlord to TikTok. All earnings factor into that £1,000 threshold.
Let’s look at specific situations to clarify when tax obligations kick in, as these real-world examples help illustrate the rules in practice.
Online Selling
Clearing out your wardrobe occasionally doesn’t count as trading – you’re simply disposing of personal possessions, often at a loss.
However, if you’re buying items specifically to resell them for profit, or regularly creating products to sell, this becomes business activity subject to the £1,000 threshold.
The key factors HMRC considers include the frequency of sales, whether you’re buying stock specifically to resell, if you’re advertising your activities, and whether you have a business-like approach to your selling.
Delivery and Driving Apps
Working for companies like Uber, Deliveroo, or Amazon Flex makes you self-employed from a tax perspective. All earnings from these platforms count towards your £1,000 threshold and must be declared if you exceed it.
Many drivers underestimate their annual earnings because they think of daily amounts rather than yearly totals.
Content Creation and Social Media
Whether you’re a YouTuber, Instagram influencer, or TikTok creator, income from these activities counts as trading income.
This includes advertising revenue, sponsored posts, affiliate commissions, and payments for promoting products or services.
Platforms like Twitch, OnlyFans, and Patreon have created new income streams that many creators don’t initially consider taxable. Subscription fees, donations, sponsorship deals, and tips all count towards your £1,000 threshold.
Freelance Services
Offering services like writing, design, tutoring, or consultancy on a freelance basis clearly constitutes self-employment.
A tutor charging £30 per hour only needs to work about 34 hours in a year to trigger registration requirements.
Property-Related Income
If your side hustle involves property – like renting out your home on Airbnb or letting parking spaces – this falls under property income rules rather than trading income. The property allowance also provides £1,000 of tax-free income, but it’s calculated separately from your trading allowance.
For those using the Rent a Room scheme to let out a room in their main residence, the allowance increases to £7,500 per year.
Your Tax Obligations
Once you exceed the £1,000 threshold, several obligations kick in that you need to understand and plan for.
Registration and Record Keeping
You must register as self-employed by 5 October after the end of the tax year in which you started earning over £1,000. This is a legal requirement.
You must keep records for at least five years after the 31 January submission deadline for the relevant tax year. HMRC can request to see your records at any time during this period, and if you can’t provide them, you could face penalties of up to £3,000.
Maintain detailed records of all income from your side hustle activities, including platform statements, invoice copies, and bank transaction records.
Tax Returns and Payments
You’ll need to complete annual self-assessment tax returns by 31 January following the tax year end.
Unlike employed income, where tax is deducted automatically, you’ll need to budget for tax payments.
A good rule of thumb is to save 20-30% of your side hustle profits to cover income tax and National Insurance contributions. Higher earners should save more, as their side hustle income may be taxed at 40% or 45%.
Payment on Account Rules
If your total tax bill exceeds £1,000, HMRC requires advance payments towards the following year’s tax.
These payments on account can catch side hustlers off guard, effectively requiring you to pay 1.5 years’ worth of tax in January.
Common Mistakes To Avoid as a Side Hustler
With HMRC’s increased focus on side hustle income and new platform reporting requirements, the margin for error has shrunk considerably. Understanding these common mistakes will help you avoid potentially costly problems:
- Assuming small amounts don’t matter: Consistent £20 or £50 payments quickly accumulate beyond the £1,000 threshold, especially when combined across multiple platforms or activities.
- Mixing personal and business transactions: Using personal bank accounts for side hustle income makes tracking difficult and increases the risk of missing deductible expenses. While business bank accounts aren’t a legal requirement, it’s strongly recommended. Learn about them here.
- Ignoring platform fees and commissions: PayPal fees, eBay commissions, and Uber’s service charges are legitimate business expenses that reduce your taxable profit. If you don’t claim these against your tax bill, you’ll probably pay much more than you need to.
- Treating everything as a hobby: If you’re doing it regularly with the intention of making money, HMRC will treat it as business activity regardless of your personal motivations.
- Poor record keeping: Failing to maintain proper records can result in penalties and make any HMRC investigation much more difficult. As a side point, if you ever need to apply for major loans or mortgages, good record-keeping will help you there too.
Getting Your Side Hustle Tax Right
Understanding side hustle tax rules protects you from penalties while ensuring you’re not paying more than necessary. The key is to stay informed about current requirements and upcoming changes, while maintaining accurate records from the outset.
With HMRC’s enhanced monitoring and new reporting requirements, hoping your side hustle income goes unnoticed is no longer a viable strategy. The more effective strategy is to understand your obligations and fulfil them efficiently.
At Double Point, we help side hustlers across all industries understand their tax obligations and implement systems that make compliance straightforward. From initial registration through to ongoing tax planning, our team ensures you stay compliant while maximising your tax efficiency.
Whether you’re just starting your side hustle journey or looking to formalise your existing activities, why not book a free consultation with us today?
We’ll help you understand exactly what you need to do and set up systems that grow with your business.
