HMRC has launched a new campaign to remind people that earning extra income from a ‘side hustle’ – a smaller income source outside of your primary job – also comes with tax obligations.
As of January 2025, online trading platforms must automatically report user income to HMRC if they make at least 30 sales or earn €2,000 or more (about £1,700) in a calendar year.
This means that anyone who sells goods or services online, whether through websites or mobile apps, needs to be aware of their income reporting requirements and pay the right amount of tax.
If you’re trading at all, be it online or offline, then you need to report your trading income to HMRC and pay income tax on any earnings that exceed your personal allowances.
So, if you have a side hustle or you’re planning to start one, here’s what you need to know.
What counts as trading?
Common activities that are often seen as hobbies to earn a bit of extra money, but are actually categorised as trading by HMRC and generate taxable income, include:
- Making or upcycling items to sell – like arts and crafts, beauty products, or furniture
- Buying things to resell at a higher price – such as clothing, collectibles, or home goods
- Providing a service as a ‘side gig’ – e.g. dog walking, tutoring, gardening, or deliveries
- Working multiple jobs at once – having lots of ‘hustles’ without a main income source
- Creating online content or being an influencer – getting paid for content posted online
- Renting out spare rooms or full properties – e.g. holiday lets through apps like Airbnb
Decluttering and selling off unwanted personal possessions normally isn’t considered trading. However, if you’re regularly selling items or picking up extra work through an app in your spare time, this is likely to be considered self-employment income for tax purposes.
Are there any exemptions?
If you’re trading, but your income for the tax year is less than £1,000, then you won’t owe any tax.
You’ll only need to inform HMRC and submit a self-assessment tax return if your trading income exceeds the £1,000 annual tax-free trading allowance.
This is in addition to the annual tax-free personal allowance of £12,570 that everyone earning less than £100,000 a year is entitled to – so the trading allowance is especially relevant for anyone who has multiple jobs but no primary source of income.
If you rent out a spare room in your home, you can earn up to £7,500 a year tax-free through the government’s Rent a Room Scheme. For other property income from rentals or holiday lettings, the £1,000 annual tax-free property allowance applies.
These are separate allowances that can only be used for the specified type of income, but it’s possible to claim them all in the same tax year if you have eligible earnings.
How to pay income tax on side hustles
You can find more details on side hustle tax obligations on the Tax Help for Hustles webpage.
It’s important to keep records of your trading income so you can report it to HMRC accurately and punctually, then pay any tax you might owe. Otherwise, you could be facing late self-assessment penalties and late payment interest on top of a backdated tax bill.
To make things easier for small ‘side hustle’ earners, the government is planning to launch a new online reporting tool – but in the meantime, self-assessment tax returns will be required.
If you find tax management confusing because you’re used to relying on PAYE, you might want to hire a personal tax consultant to complete your self-assessment submissions on your behalf.
Here at gbac, we have a team of accountants in Barnsley who can help individuals across the country with bookkeeping and filing taxes. Just contact our tax agents on 01226 298 298 or email us at info@gbac.co.uk to find out what we can do for you.