Side Hustle Tax UK: How to Report Your Side Hustle Income

Thinking of starting a side hustle? Whether it’s a step towards self-employment or just a way to make some extra cash, there’s loads to love about it. But here’s something to remember: side hustle taxes. Even small gigs have tax obligations in the UK and what you owe depends on how much you earn.

If this all sounds confusing, don’t worry, we’ve got you covered. This guide breaks it all down so you can stay on top of taxes and grow your hustle with confidence.

What Counts as a Side Hustle in the UK?

Put simply, a side hustle is something you do alongside your main job to bring in some extra cash. It’s a little project or passion that doesn’t take over your day job but adds something to your life.

Here’s how that might look:

You’re a full-time teacher but in your free time, you bake custom cakes and sell them to local clients.
You work part time as a graphic designer and outside of that you’re a photographer specialising in weddings and events.
You’re a jewellery maker who works a 9-to-5 and sells unique handmade pieces on Etsy in your spare time.

So what’s the difference between a job and a side hustle when it comes to HMRC? It all comes down to how much you earn.

If you earn less than £1,000 in a tax year, HMRC doesn’t count it as taxable income. That means no need to register as self-employed or declare it. But if you go over that threshold, things change and you’ll need to sort out the paperwork.

Do I Need to Pay Tax on My Side Hustle?

The £1,000 Trading Allowance

If you’re earning over £1,000 from your side hustle this tax year, you’ll need to pay taxes. Unlike your main job, where PAYE takes care of it, side gigs work differently. You’ll have to register as self-employed with HMRC and file a self assessment tax return.

When Side Hustle Income Becomes Taxable

If you’re earning from a side hustle and you are you past the £1,000 trading allowance, you’ll need to notify HMRC. You’ll need to register as self employed and complete a self assessment return to report your income to HMRC.

Register with HMRC for Your Side Income

Registering with HMRC is a big step to stay legit and make the most of your hard work (you’ve earned it!). Start by choosing your business structure—sole trader or limited company—and register for self-assessment. Sorting out your legal structure sets you up for success and keeps things running smoothly.

When to Register as Self-Employed

Make sure you register as self-employed with HMRC by 5 October each year. If you miss that deadline, you could face fines or interest.

How to Register with HMRC?

Registering with HMRC as self-employed involves the following steps:

Step 1: Get your details ready. Before you register, make sure you have all the essentials to hand. You’ll need your personal information, like your National Insurance number and a few details about your work, such as when you started earning as self-employed.
Step 2: Go to the HMRC website. Head to the HMRC online self assessment registration page. This is your starting point for setting everything up.
Step 3: Create a Government Gateway account. If you don’t already have one you’ll need to create a Government Gateway account. This is basically your portal for managing taxes and other accounts with HMRC.
Step 4: Fill in the registration form. Fill in the online form with your details. You’ll need to indicate you’re registering for self employment so make sure to select the right options.
Step 5: Wait for your UTR. Once registered HMRC will send you a Unique Taxpayer Reference (UTR) through the post which can take up to 10 working days. This is your HMRC ID.
Step 6: Activate your online account. Once you have your UTR you’ll need to activate your online self assessment account. Follow the instructions in your welcome letter or email from HMRC.
Step 7: Keep your records organised. Now you’re registered, you’ll need to track your income and expenses. We recommend setting up a system (even a simple spreadsheet works!) to stay on top of it.

How to Report Your Side Hustle Income?

If you’re employed, your taxes are usually sorted by your employer. But if you’ve got a side hustle bringing in more than £1,000 a year, things get a bit more hands-on. You’ll need to file a self assessment tax return to report that extra income.

Filing a Self-Assessment Tax Return

Running your own gig means you’re in charge of your taxes. No one’s automatically deducting anything for you; it’s on you to calculate what you owe and pay it. That’s where the annual Self-Assessment Tax Return comes in.

The first step is to register with HMRC to declare your side hustle income. It’s not as daunting as it sounds; you just need to provide some basic details: your name, national insurance number, and address. Once you’re in the system, HMRC will send you a Unique Taxpayer Reference (UTR). That number is key to filing your return.

You’ve got until 31 January each year to submit your self-assessment. Missing it could cause penalties or even backdated taxes. So, whether your side hustle is big or small, staying on top of your taxes is a game-changer for peace of mind.

What Do You Need to Report?

All side hustle income (yes, every penny)
Allowable business expenses (think travel or equipment costs)
National Insurance contributions
Your Unique Taxpayer Reference (UTR)

Allowable Expenses for Side Hustles

Permissible expenses for your UK side hustle cover a lot of ground. Think about the basics: operating costs like stationery, software, phone bills – anything directly tied to running your hustle. And it doesn’t stop there. You can also claim things like property rent, mortgage interest, council tax, business rates, utilities like water, electricity, and gas. These deductions are more than just numbers. They can actually help lower your taxable profit and shrink your tax bill.

To claim allowable expenses for your side hustle, here’s what you need to do:

First, make sure your side hustle qualifies as self-employment. Without that, you’re not in the claiming game.
Keep track of every single business expense, big or small. Just make sure it’s all purely for business purposes.
Take a closer look at the HMRC tax rules to see which of your expenses actually qualify as “allowable.”
When it’s time to file your self-assessment tax return, include those allowable expenses.
Finally, total everything up, deduct it from your income, and watch your tax bill shrink.

Common Deductions Include:

Software or tools you use for your hustle
Internet and phone bills
Travel costs
Marketing and advertising
Office supplies and workspace costs

5 Tips for Staying Compliant with HMRC

Managing your money might seem tricky, but it gets easier with a few simple steps. Here’s how you can do it:

Track all the money you make and spend
Write it down or keep a record so nothing slips through the cracks.
Use tools like apps or spreadsheets
They make organising your finances way simpler.
Save some money for taxes
Don’t wait until the last minute—set it aside as you earn.
Know when your taxes are due
Missing deadlines can lead to penalties. Stay ahead of them!
Pay attention to letters from HMRC
Ignoring them won’t make them go away. Open them, read them, and take action.

What Happens If You Don’t Report Your Side Hustle Income?

Not paying income tax on your side hustle could come back to bite you. HMRC fines are no joke. Plus, delaying payment only makes it worse because interest stacks up the longer you wait.

FAQs

Can I hire someone to help with my side hustle, and how does that affect my taxes?

If you’re thinking of hiring help, keep in mind that it affects your taxes. You’ll need to report expenses and, potentially, deal with things like payroll taxes.

What if my side hustle operates in cash, do I still need to report it?

Yes, even if your side hustle runs on cash, you’ve got to report it. It might feel small or off the radar, but it still counts as taxable income.

Do I need business insurance for my side hustle?

Most side hustles don’t technically need insurance, at least not if it’s just you making the income. However, although having coverage might not be required, it can save you a lot of stress if something unexpected happens.

About
Latest Posts

Jaden Boolkah

Hi, I'm Jaden Boolkah, a Senior Crypto Accountant with over seven years of experience in the crypto world. I started exploring cryptocurrencies early on, and my passion for numbers eventually led me to accountancy about five years ago. I love diving into the nuances of macroeconomics and global finances—it keeps me curious and continuously learning. My work is all about making taxes work for you, not against you, and I’m dedicated to handling your company’s finances in the most efficient way possible.