Do You Need to File a Self-Assessment for Your Side Hustle? HMRC’s Position Explained

With side hustles on the rise, many employed individuals in the UK are earning extra income through freelancing, selling products online, or offering services. But how does this impact your taxes? HMRC has clear rules regarding side hustle income, and knowing them can save you from penalties.  

What HMRC Says About Side Hustle Income

According to HMRC, you must declare any additional income from a side hustle if it exceeds £1,000 in a tax year. This rule is part of the Trading Allowance, which lets individuals earn up to £1,000 from casual trading without reporting it.  

If your side hustle income exceeds this threshold—even by a small amount—you are required to:  

1. Register for self-assessment.  

2. File a tax return and declare your additional income.  

Example: Meet Sarah

Sarah works full-time as a graphic designer, earning £35,000 per year through PAYE. On weekends, she sells custom art prints online, earning £2,500 in the tax year. Here’s how Sarah’s situation unfolds:  

1. Does Sarah Need to File a Tax Return?

   Yes. Her side hustle income exceeds the £1,000 Trading Allowance, meaning she must declare it.  

2. What Can Sarah Deduct as Expenses?

Sarah can deduct costs like art supplies, packaging, and shipping fees. If her expenses total £800, she only pays tax on £1,700 (£2,500 - £800).  

3. What Happens If She Doesn’t File?

If Sarah doesn’t report her side hustle income, she risks penalties and interest on any unpaid taxes.  

Key Takeaways

- Earning over £1,000 from a side hustle triggers the requirement to file a self-assessment tax return.  

- Keep detailed records of income and expenses to calculate your taxable profit accurately.  

- Register for self-assessment by 5th October following the tax year in which you earned the income to avoid late registration penalties.  

More information can be found on this AXA article or directly on the HMRC website.