Is Your Side Hustle Taxable?
In early 2025, HM Revenue & Customs (HMRC) launched a campaign to help people with extra income understand their tax obligations. Whether you’re selling handmade goods, delivering packages, or renting out a spare room, it’s important to know when and how to report this income.
If you’ve got a side hustle—or even if you’re just earning a bit extra on the side—it’s worth checking whether you need to notify HMRC. Let’s dive into the details to help you understand the tax rules and avoid any nasty surprises.
What’s Covered in HMRC’s Guide for Side Hustlers?
HMRC’s new guide, Take the hassle out of your side hustle, covers five common sources of additional income that may be taxable:
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Buying or making things to sell
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Side gigs (like delivery driving or freelance work)
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Working for yourself doing multiple jobs (dog walking, online tutoring, etc.)
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Content creators or social media influencers
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Property rental (e.g., renting out a second home or holiday rentals)
They’ve also created an online income checker to help you determine if you need to report additional income to HMRC. You can find it here.
What Is the Trading Allowance?
For many side hustles, you may be eligible for the trading allowance, which exempts up to £1,000 of trading income from tax each year. Here’s how it works:
- £1,000 tax-free: If your total income from selling, side gigs, or similar activities is £1,000 or less in a tax year, you don’t need to report it to HMRC.
- Beyond £1,000: If your income exceeds £1,000, you have a choice:
- You can deduct £1,000 from your income before tax is calculated, or
- You can deduct actual expenses related to earning that income (like materials or advertising costs).
The Property Allowance and Rent-a-Room Scheme
The rules for property rental are slightly different:
- Property allowance: If you rent out a property you don’t live in, you can receive up to £1,000 in rental income tax-free.
- Rent-a-room scheme: If you rent out a room in your home, you can earn up to £7,500 annually without paying tax.
If you meet the conditions for these allowances, you can benefit from both the trading allowance and property allowances in the same tax year—just make sure you meet the relevant conditions!
Reporting Threshold: What’s Changing?
In a bid to simplify the process, the government has announced that the self-assessment reporting threshold for trading income will increase from £1,000 to £3,000 within this parliament.
Important: This doesn’t mean the tax-free threshold is increasing. Instead, it means you won’t have to file a tax return if your trading income is between £1,000 and £3,000—you’ll be able to report it online and pay through a simplified system.
While your tax liability won’t change, this new reporting tool is designed to reduce paperwork and make things easier for small earners.
Practical Tip: When Do You Need to Report Your Side Hustle Income?
If you earn more than £1,000 from your side hustle, you may need to complete a tax return. However, there are exceptions:
- If you’re simply selling unwanted personal items, you generally won’t need to pay tax.
- But—beware—if you sell something like a valuable antique or collectible for more than £6,000, you may be liable for Capital Gains Tax (CGT). This can apply if you’re selling things like furniture, vintage items, or even collections of things like stamps or chess sets.
So, if you’re in doubt about whether you’re making a profit from something personal, it’s always wise to check with a tax professional.
Final Thoughts: Get Ahead of Your Tax Obligations
Side hustles can be a great way to earn extra money, but it’s important to stay informed about your tax responsibilities. Whether it’s trading allowance, property rental or something else, make sure you know where you stand with HMRC.
And remember, if you’re ever unsure about whether you need to report income or how much tax you’ll owe, don’t hesitate to get professional advice—we’re here to help at Merranti Accounting.
