Are Side Hustles Taxable in the UK? Here’s What You Need to Know

TL;DR: Are Side Hustles Taxable in the UK?

Yes, side hustles are taxable in the UK. If you’re making money from a side hustle, HMRC wants to know about it, and you might need to pay tax depending on how much you earn. We’ll break down everything you need to know about what counts as taxable income, how to report it, and tips for making your side hustle as tax-friendly as possible.

Do You Need to Pay Tax on a Side Hustle?

The short answer is yes—any extra money you make through a side hustle is considered taxable income in the UK. Whether you’re freelancing, selling crafts on Etsy, tutoring, or running a small online shop, HMRC wants you to report it.

The Basics of Tax-Free Allowances

1. Personal Allowance

The Personal Allowance is the amount you can earn in a year before you pay any tax. For the 2023/2024 tax year, it’s £12,570. If your total income (that’s your main job plus any side hustle earnings) is below this, you’re in the clear and won’t need to pay tax.

2. Trading Allowance

The Trading Allowance is a special allowance just for small business income. If you make £1,000 or less from your side hustle in a tax year, you don’t need to report it. But, if you make over £1,000, you’ll have to declare it to HMRC, even if you end up not owing any tax.

How to Report Side Hustle Income in the UK

1. Register with HMRC

If your side hustle earnings mean you need to pay tax, you’ll need to register with HMRC for Self-Assessment. This involves creating an account and providing some info about your income from your side hustle.

2. Fill Out a Self-Assessment Tax Return

Each year, you’ll need to complete a tax return through Self-Assessment. This is where you report all your income, including your main job and side hustle. Don’t forget to include any relevant expenses—you might be able to claim deductions!

3. Pay Any Tax Due

Once you’ve filed your tax return, HMRC will let you know how much you owe. If you need to pay tax, the deadline is usually January following the end of the tax year. Make sure you don’t miss this!

Expenses and Deductions: Saving on Taxes with Your Side Hustle

The good news? If you’re earning from a side hustle, you can often reduce your tax bill by claiming related expenses. Here are some common ones:

  • Supplies: Anything you need to buy for your side hustle, like materials for crafts or office supplies, can often be deducted.
  • Home Office Costs: If you’re working from home, you might be able to claim part of your rent, internet, or electricity.
  • Marketing: Money spent promoting your side hustle, like ads or boosted posts on social media, can be deducted.
  • Travel: If your side hustle involves travel (like meeting clients), you might be able to claim expenses like fuel or train fares.

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

If you don’t declare your side hustle income, HMRC can issue penalties. They can fine you and make you pay back any tax you owe, plus interest. So it’s worth making sure you keep track of your side hustle earnings and report everything correctly.

Keeping Your Side Hustle Tax-Friendly

Here are some easy ways to stay on top of your side hustle finances and avoid any tax surprises:

  • Keep Good Records: Track all your income and expenses for your side hustle. You can use an app or a simple spreadsheet—whatever works for you.
  • Separate Bank Account: Using a separate bank account for your side hustle can make tracking much easier.
  • Save for Taxes: Set aside a portion of your side hustle income in case you need to pay tax. It’s better to be prepared!
  • File on Time: Late filing can lead to penalties, so mark your calendar and don’t miss the deadline.

Bottom Line: Are Side Hustles Taxable in the UK?

Yes, side hustles are taxable, but with a bit of planning, dealing with taxes on side hustle income doesn’t have to be a hassle. By understanding your allowances, keeping good records, and filing on time, you can avoid any surprises. Even if your side hustle is just a small income boost, it’s better to stay informed and plan ahead.

Final Thought

Side hustles can be incredibly rewarding, and paying taxes on them doesn’t have to take away from that. With the right approach, you can keep your side hustle profitable, tax-compliant, and stress-free. Here’s to happy—and successful—side hustling!