If your side hustle has started making money, it is important to understand when HMRC needs to know about it.

In the UK, you can usually earn up to £1,000 in gross trading income in a tax year before you need to tell HMRC. This is known as the trading allowance.

But once your side hustle income goes over £1,000, you may need to register for Self Assessment and declare the income on a tax return.

What counts as a side hustle?

A side hustle could include income from:

• Selling products online
• Freelance work
• Social media income
• Design or marketing work
• Gardening or cleaning
• Beauty treatments
• Tutoring
• Delivery work
• Repair work
• Content creation
• Renting out equipment

The key point is whether you are making money from trading activity. If you are regularly selling goods or services with the aim of making a profit, HMRC may treat it as taxable income.

Is the £1,000 based on profit?

No. The £1,000 trading allowance is based on gross income, not profit.

That means it looks at the total amount you receive before taking off expenses.

For example, if you sell products online and receive £1,200 in sales, but spend £500 on materials, your gross income is still £1,200.

Because the gross income is over £1,000, you may need to tell HMRC.

What happens if you earn less than £1,000?

If your gross trading income is £1,000 or less in the tax year, you may not need to tell HMRC about it.

However, you should still keep records of what you earned. This is useful in case your income grows later or HMRC asks for information.

You may also still need to register in some situations, such as if you want to claim a loss, pay voluntary National Insurance contributions, or use your self-employed income for certain claims.

What happens if you earn more than £1,000?

If your gross trading income is more than £1,000 in the tax year, you usually need to register for Self Assessment and declare the income.

This does not always mean you will pay a large amount of tax. The tax depends on your total income, expenses, allowances and personal circumstances.

But even if there is little or no tax to pay, you may still need to report the income correctly.

Can you claim expenses instead?

Yes, in many cases you can choose between using the £1,000 trading allowance or claiming your actual allowable business expenses.

You cannot usually claim both against the same income.

For example:

• If your side hustle income is £1,500 and your expenses are only £200, the trading allowance may be more useful.
• If your side hustle income is £1,500 and your genuine business expenses are £900, claiming actual expenses may give a better result.

This is where good records matter. Without proper receipts, invoices and bank records, it becomes harder to work out the best option.

Common mistake: only looking at profit

A lot of people think they only need to tell HMRC once they make more than £1,000 profit.

That is not how the trading allowance works.

The £1,000 figure is based on gross income before expenses. This is one of the most common mistakes with side hustle tax.

If you have taken more than £1,000 from customers, platforms or clients during the tax year, do not ignore it.

What records should you keep?

You should keep clear records of:

• Sales income
• Invoices
• Receipts
• Platform statements
• Bank payments
• Business expenses
• Mileage, if relevant
• Stock or material costs
• Software or subscription costs

Even a simple spreadsheet can be a useful starting point, as long as it is accurate and regularly updated.

When do you need to register?

If you need to register for Self Assessment, the deadline is usually 5 October after the end of the tax year in which you earned the income.

The UK tax year runs from 6 April to 5 April.

For example, if your side hustle income went over £1,000 during the tax year ending 5 April, you would usually need to register by 5 October after that tax year.

Why this matters

HMRC is receiving more information from online platforms, marketplaces and payment providers. That means income from side hustles is becoming easier to trace.

If you are making money online or earning extra income outside your job, it is better to deal with it early rather than waiting for HMRC to contact you.

Getting it right from the start can help you avoid penalties, interest and unnecessary stress.

Final thoughts

Making money from a side hustle is a positive step, but it still needs to be reported correctly.

If your gross trading income is over £1,000 in a tax year, you may need to tell HMRC and complete a Self Assessment tax return.

Merranti Accounting can help you work out whether you need to register, what expenses you can claim and how to keep your records organised.

Written by Steve Watts