Keep Your Side Hustle Compliant and Profitable
Your side hustle might have started as a creative escape or a weekend gig, but when does it become taxable income?
And when do you need to register for Self Assessment?
With HMRC tightening its grip on side income reporting, and new 2025 rules on the horizon, staying ahead of your tax obligations is more important than ever.
Do You Need to Pay Tax on Your Side Hustle?
If your total income from side activities stays under £1,000 per tax year, you don’t need to report or pay tax—this is covered by the Trading Allowance.
Go over £1,000? Then it’s time to register for Self Assessment and declare your earnings.
Even if your side gig feels small, HMRC sees any consistent income as taxable, so it’s best to check where you stand.
How & When to Register for Self Assessment
If you earn beyond the threshold, here’s what you need to know:
Registration Deadline: 5 October following the tax year in which you exceeded £1,000.
📌 Tax Return Deadlines:
📝 Paper return: 31 October
💻 Online return: 31 January
🚨 Miss a deadline? Expect an initial £100 penalty, increasing if left unresolved.
Expenses vs. Trading Allowance / Which Saves You More?
If you’re above the £1,000 limit, you can reduce your taxable income using one of these methods:
Trading Allowance – Automatically deduct £1,000 from your earnings before tax is applied.
Actual Business Expenses – Deduct costs related to your side hustle (e.g. equipment, software, travel) instead of using the flat allowance.
⚠️ You can’t claim both—you must choose the option that reduces your tax bill the most.
If your expenses are minimal, the Trading Allowance keeps things simple. If your costs exceed £1,000, deducting actual expenses could save you more.
New 2025 Rules Online Platforms Report Your Income
From 1 January 2025, platforms like eBay, Airbnb, Etsy, and Vinted will be required to report user earnings to HMRC if:
💰 Annual income exceeds €2,000 (£1,700) OR
📦 30+ transactions are completed per year
What This Means for You
If you sell regularly, HMRC may already know about your income.
Even if you haven’t been contacted, you may still need to report earnings.
Skipping registration isn’t an option, platforms will now provide transaction data directly to HMRC.
What Happens If You Don’t Declare Your Side Income?
Failing to report taxable income can result in:
🚨 £100+ fines for late tax returns
🚨 Interest charges on unpaid tax
🚨 HMRC investigations into undeclared earnings
Even small amounts can trigger penalties. Keeping accurate records ensures you stay compliant.
Final Thoughts
A side hustle can be more than just extra income, it can be the foundation of something bigger.
But with growth comes responsibility, and understanding side hustle tax is essential to staying on the right side of HMRC.
Not sure where to start?
Demsa Accountants is always here to help.
