One of the most common questions from people starting a side hustle is whether they need to tell HMRC about the extra income. The short answer: it depends on how much you earn — but the rules are simpler than most people think.
Important: this article explains general UK tax rules in plain English. It is not financial or legal advice. If you are unsure about your own situation, speak to a qualified accountant.
The £1,000 Trading Allowance
HMRC gives every UK taxpayer a £1,000 Trading Allowance each tax year. This means if your total side hustle income is under £1,000 in a tax year, you do not need to declare it or pay any tax on it at all.
This covers selling on eBay, doing odd jobs, freelancing, making things and selling them, renting out your driveway — almost any kind of self-employment or trading income.
When you need to register for Self Assessment
If your side hustle earns more than £1,000 in a tax year, you need to register for Self Assessment and submit a tax return. This sounds more frightening than it is — it's just a form you fill in online each year telling HMRC what you earned.
You register at HMRC's website (gov.uk), and they'll send you a Unique Taxpayer Reference (UTR) number. You then submit your return by 31 January each year for the previous tax year.
How much tax will you actually pay?
You only pay tax on profit — not on everything you earn. And your side hustle income is added on top of your employment income, so the rate you pay depends on your total income for the year.
Most people with a full-time job already use their Personal Allowance (£12,570 for 2024/25). This means side hustle profits are usually taxed at 20% (basic rate) for amounts up to around £50,270 total income, or 40% above that.
You also pay Class 4 National Insurance at 6% on profits above £12,570.
Reducing your tax bill with expenses
The smart move is to keep records of any legitimate expenses related to your side hustle — these reduce the profit you're taxed on. Common deductible expenses include equipment, software subscriptions, a portion of your phone bill, postage, packaging, advertising costs, and any tools or materials used.
If you use a room at home for work, you can also claim a portion of household costs. An accountant can help you identify everything you're entitled to claim.
Practical tips to stay organised
Open a separate bank account or pot for your side hustle income from day one. Track all income and expenses in a simple spreadsheet or free tool like Wave Accounting. Keep digital copies of all receipts. This makes your tax return straightforward and ensures you never overpay.
Most people with a straightforward side hustle don't need an accountant, but if you're earning £20,000+ per year from self-employment, the cost of an accountant (typically £200–£400/yr for a simple return) usually saves you more than it costs.