Do You Need to Pay Tax on Your Side Hustle? Here’s What You Need to Know
With the rise of the gig economy and the increasing cost of living, more people are turning to side hustles to supplement their income. Whether you’re selling handmade products, offering freelance services, or renting out property, you might be wondering: Do I need to pay tax on my side hustle?
HM Revenue & Customs (HMRC) has launched a new campaign to help individuals understand their tax obligations and avoid unexpected penalties. Below, we break down the five main types of side hustles and what you need to know about paying tax on them.
1. Selling Products Online or In-Person
If you sell handmade goods, upcycled furniture, or resell items at a higher price, HMRC considers this trading. This applies whether you sell through marketplaces like eBay, Etsy, or at local events.
2. Providing Services or Side Gigs
Side gigs can include freelance work such as dog walking, tutoring, delivery driving, car repairs, or gardening. If you regularly provide services for payment over a period of months, HMRC is likely to classify you as self-employed.
3. Working Multiple Freelance or Self-Employed Jobs
If you earn income from multiple sources, such as being a freelance graphic designer and a part-time photographer, you may need to register as a sole trader and pay tax on your earnings.
4. Content Creators & Social Media Influencers
Making money from sponsored posts, YouTube ads, affiliate links, or blog monetization? Even if it started as a hobby, HMRC considers it trading if you earn money from content creation.
5. Renting Out Property
If you rent out a holiday home, spare room, or property through Airbnb or other platforms, you may be subject to different tax rules. The Rent a Room Scheme allows you to earn up to £7,500 tax-free, while the property allowance gives a £1,000 tax-free threshold for rental income.
How Much Can You Earn Before Paying Tax on Your Side Hustle?
The trading allowance allows you to earn up to £1,000 per tax year before needing to declare your income. However:
- This £1,000 allowance applies to all your combined side hustle income, not per activity.
- If you earn over £1,000 from your side hustle, you must register with HMRC and may need to pay Income Tax and National Insurance.
- Selling less than 30 items a year does not automatically mean you are exempt from tax. Online platforms report sales data to HMRC, so it’s essential to track your income accurately.
- Casual sales of personal items (e.g., selling old clothes or furniture) are generally not taxable.
Tax Reliefs & Allowances for Side Hustlers
You can use the £1,000 trading allowance alongside the Rent a Room Scheme and property allowance, helping to reduce your taxable income. Understanding your allowances ensures you’re only paying the tax you owe—and not more.
Need Help with Side Hustle Tax? Contact Us!
Navigating tax obligations for your side hustle can be complex. Our accountants can help you determine whether you need to pay tax, register as self-employed, or maximize available allowances.
Get in touch with us today for personalised tax advice!
For more information, visit HMRC’s tax guidance for side hustles: