Side Hustles and HMRC: When Do You Need to Report Your Income?

The rise of online marketplaces, freelancing, content creation and flexible working has resulted in more people than ever earning additional income through a side hustle. Whether you sell products online, offer services in your spare time, create content on social media, or undertake occasional freelance work, it is important to understand when this income needs to be reported to HMRC.

What Is a Side Hustle?

A side hustle is any activity undertaken outside your main employment which generates income. Common examples include:

• Selling handmade products online

• Freelance design, writing or consultancy work

• Dog walking, gardening or tutoring

• Content creation on platforms such as YouTube, TikTok or Instagram

• Buying and selling items for profit

• Providing services through online platforms

While earning extra income can be a great way to supplement your earnings, it may also create tax obligations.

The £1,000 Trading Allowance

HMRC provides a Trading Allowance of £1,000 per tax year. If your total gross income from trading activities is £1,000 or less during the tax year, you will usually not need to report the income or complete a Self Assessment tax return.

Importantly, the £1,000 limit applies to your income before expenses, not your profit.

For example:

• Income from tutoring: £800

• Expenses: £100

As your gross income is below £1,000, you would generally not need to report it to HMRC.

However:

• Income from tutoring: £1,200

• Expenses: £500

Although your profit is only £700, your gross income exceeds £1,000 and you may need to register for Self Assessment and report the income.

Selling Personal Possessions Is Different

Many people worry after hearing that online platforms such as eBay, Vinted and Etsy share information with HMRC.

Selling unwanted personal belongings is generally not taxable and does not automatically create a reporting requirement. The key distinction is whether you are simply disposing of items you already own or whether you are buying, making or sourcing items with the intention of making a profit.

For example:

Usually not taxable

• Selling old clothes

• Selling unwanted household items

• Selling your child's outgrown toys

Potentially taxable

• Buying items specifically to resell

• Making products to sell online

• Running a regular online business

When Must You Tell HMRC?

In most cases, if your gross trading income exceeds £1,000 during the tax year, you should notify HMRC and register for Self Assessment.

For a new business or side hustle, registration is generally required by 5 October following the end of the tax year in which the income arose.

You will then normally need to submit a Self Assessment tax return and pay any tax due by the following 31 January.

HMRC Has More Information Than Ever Before

Online platforms are now required to share certain seller information with HMRC. This does not automatically mean tax is due, but it does mean HMRC has greater visibility of income generated through online marketplaces and digital platforms.

Keeping accurate records of your income and expenses has therefore become increasingly important.

Don't Wait for HMRC to Contact You

Many taxpayers assume that because their side hustle is small, HMRC will never become aware of it. Unfortunately, this can lead to penalties and interest if income should have been reported.

If you have received income from a side hustle and are unsure whether it needs to be declared, obtaining advice early can often prevent unnecessary problems and may reduce any penalties if a disclosure is required.

How BH Taxation Can Help

At BH Taxation, we assist individuals with:

• Registering for Self Assessment

• Reporting side hustle income correctly

• Claiming allowable expenses

• Understanding the Trading Allowance

• Resolving historic undeclared income

• Making voluntary disclosures to HMRC

If you are unsure whether your side hustle needs to be reported, we can review your circumstances and provide clear, practical advice before HMRC comes knocking.