Introduction to Side Hustles in the UK
If you’ve ever sold homemade cakes to your neighbours, walked a few dogs on weekends, or listed an extra room on Airbnb, congratulations – you’re part of the UK’s vibrant side hustle scene! Side hustles have absolutely boomed across Britain in recent years, with more people than ever juggling a “main” job and something extra on the side. From Gen Z students selling vintage gear online, to retirees offering tutoring sessions, there’s truly something for everyone. But while it’s exciting to see that extra cash roll in, there’s one thing every budding entrepreneur needs to remember: tax. Yes, we know it sounds dull (and maybe even a bit scary), but understanding how HMRC views your side gig is key if you want to keep things above board. In this article, we’ll walk you through the different types of side hustles in the UK and what each means when it comes to tax. Trust us – getting your head around this stuff now will save you a world of hassle later!
2. Freelancing and Contracting
If you’re a freelancer or contractor in the UK—maybe you write, design, code, or do a bit of everything—your tax journey is an adventure all on its own. Let’s break down what you need to know about taxes as a side hustler in this category.
The Self-Assessment System
First things first: most freelancers will need to register as self-employed with HMRC and file a Self Assessment tax return every year. This means you’ll report your earnings and expenses yourself, rather than having your tax sorted by an employer.
Main Tax Responsibilities
| What You Need To Do | When |
|---|---|
| Register as self-employed | By 5 October after end of tax year you started working for yourself |
| Complete Self Assessment tax return | By 31 January following the end of the tax year |
| Pay any tax owed (including National Insurance) | By 31 January (and sometimes 31 July for payments on account) |
Allowable Expenses: What Can You Deduct?
The good news is you can claim certain business expenses to reduce your taxable profit. Typical allowable expenses include:
- Home office costs (a portion of your rent, utilities, broadband)
- Software subscriptions or tools needed for work
- Travel costs for work (not including commuting to a regular place of work)
- Professional fees (like accountant services or industry memberships)
- Stationery, marketing, and advertising costs
Just remember to keep those receipts! HMRC loves paperwork almost as much as they love taxes.
The Joys (and Woes) of HMRC Forms
Navigating HMRC’s online portal can be a bit of a learning curve—there are lots of boxes to tick and questions that seem to need a translation guide. But don’t worry; once you’ve done it once or twice, it does get easier. And if in doubt, there’s always the HMRC helpline or a friendly accountant who speaks fluent ‘tax’.
Quick Tips for Stress-Free Tax Returns:
- Track your income and expenses throughout the year (spreadsheets are your friend!)
- Set aside money for your tax bill as you go—don’t wait until January surprises you
- If earning over £1,000 from freelancing, remember to register with HMRC—even if it’s just a side gig!
- If turnover exceeds £85,000 per year, youll need to register for VAT too—but most side hustlers won’t need to worry about this just yet.
So whether you’re penning blogs, designing logos, or coding apps in your spare time, understanding the basics of freelance tax will keep you out of trouble and maybe even help you save some money along the way.
3. Selling Goods Online
If you’ve ever tried selling your old bits and bobs on eBay, listed handmade crafts on Etsy, or even flipped a few pairs of trainers on Depop, you’re definitely not alone! The online marketplace in the UK is booming, but with all those sales comes a bit of tax homework. So, what do you actually need to know if you’re making some extra cash this way?
The Trading Allowance: Your First £1,000
Let’s start with the good news. In the UK, there’s something called the ‘trading allowance’, which means you can earn up to £1,000 a year from selling goods online before needing to tell HMRC about it. Whether it’s vintage jumpers or that board game collecting dust, as long as you don’t go over that grand, you’re in the clear tax-wise.
When Does It Become a Business?
Here’s where things get interesting. If your side hustle starts looking less like a clear-out and more like an actual business – for example, you’re regularly buying items just to sell them at a profit (think sneaker flipping), or you’re making products with the intention of selling – HMRC might class you as a ‘trader’. That means it’s time to register for Self Assessment and report your earnings.
Key Bits to Remember
– Keep records of everything: sales, costs, postage fees – it all counts.
– The trading allowance applies per person, not per platform (so don’t try to sneakily split across accounts!).
– If you make over £1,000 profit from all online sales combined in a tax year, it’s best to play it safe and let HMRC know.
– Expenses like packaging and listing fees can often be deducted if you’re officially trading.
Selling online can be super rewarding (and pretty addictive), but keeping on top of your tax situation means no nasty surprises later. So whether you’re shifting outgrown clothes or starting your own little empire, make sure you know where you stand with HMRC!
4. Renting Out Property or Rooms
If you’re thinking about letting out your spare room, becoming an Airbnb host, or renting out a second property, it’s important to understand the UK tax rules that apply. The good news is, there are some helpful schemes and allowances to make things a bit easier for side hustlers just starting out!
The Rent a Room Scheme Explained
For anyone renting out a furnished room in their own home (not a whole separate property), the government’s Rent a Room Scheme is your friend. This scheme lets you earn up to £7,500 per year tax-free from letting out furnished accommodation in your main residence. If you share the income with someone else (like a partner), you each get half of the allowance (£3,750 each).
Who Qualifies?
- You must be letting out furnished accommodation in your main home
- This works whether you’re renting to long-term lodgers or short-term guests through platforms like Airbnb
- It doesn’t apply if the space is unfurnished or if it’s not your main residence
Letting Beyond the Allowance
If your income from renting exceeds £7,500 (or £3,750 each), you’ll need to complete a Self Assessment tax return and declare all your rental income. You can choose between:
- Claiming the Rent a Room allowance and paying tax only on income above the threshold
- Opting out of the scheme and instead deducting actual expenses (like repairs, insurance, and utility bills) from your rental income before calculating your taxable profit
Allowable Income & Expenses Table
| Scenario | Tax-Free Allowance | What Counts as Taxable Income? |
|---|---|---|
| Renting 1 furnished room in your main home (under £7,500/year) | £7,500 (£3,750 if shared) | No taxable income if under allowance |
| Renting more than £7,500/year or multiple rooms/properties | No extra allowance for additional properties | Total rent minus allowable expenses OR above-allowance rent after Rent a Room Scheme |
| Airbnb hosting (own home) | £7,500 via Rent a Room if eligible | If over allowance: income minus expenses or opt for scheme allowance |
| Airbnb hosting (whole property/second home) | No Rent a Room allowance applies | Total rent minus allowable expenses only |
Key Records to Keep
- A record of all rental payments received (bank statements or receipts)
- A breakdown of any expenses claimed (repairs, cleaning costs, insurance, etc.)
- Your agreement with tenants/lodgers (even informal ones!) or Airbnb booking confirmations
- The number of days each room/property was let during the tax year—especially important for Airbnb hosts due to different rules for “furnished holiday lettings” versus regular rentals!
Quick Tip:
If you’re brand new to this side hustle world, keeping everything organised from day one will save you headaches later on. HMRC can ask for records up to six years old!
5. Gig Economy Work
If you’ve ever thought about signing up for Deliveroo, Uber, or even doing a few quick tasks on TaskRabbit, you’re definitely not alone! The gig economy is booming in the UK, and it’s a brilliant way to earn some extra cash around your main job or studies. But, as tempting as it is to just pocket your earnings and carry on, there are a few important tax things to keep in mind to stay on the right side of HMRC.
Types of Gigs
Popular gigs include food delivery (think Deliveroo, Just Eat), ride-sharing (like Uber or Bolt), and micro-task platforms (such as TaskRabbit or Fiverr). Each platform might have its own quirks, but when it comes to tax, the rules are pretty similar.
What About National Insurance?
Most gig work means you’re classed as self-employed. This means you’ll likely need to pay Class 2 and Class 4 National Insurance contributions if your profits go over certain thresholds (currently £12,570 for most people). Don’t panic—these are just payments that go towards your state pension and benefits. If you’re only earning small amounts from your side hustle, you might not need to pay much or anything at all, but it’s always worth checking.
Keeping Everything Above Board
The golden rule: keep clear records of what you earn and any expenses related to your gig work (like fuel or phone bills). Use apps or spreadsheets—whatever works for you! At the end of the tax year, you’ll need to fill out a Self Assessment tax return declaring your income. If it’s under £1,000 in total from all side hustles, you could be covered by the trading allowance and may not owe any tax—but it’s still smart to keep track just in case. Staying organised now saves big headaches later!
6. Creative and Digital Side Hustles
Taxing the Online Hustle: YouTubers, Influencers & Tutors
If your side hustle lives online – whether you’re a YouTuber, an influencer on Instagram, or an online tutor – your tax situation in the UK comes with a few unique twists. It’s not just about counting cash from your main gig; even those “little extras” like sponsored posts or affiliate links can quickly add up and attract HMRC’s attention.
Sponsorship Income: More Than Just Freebies
First up, let’s talk about sponsorships and brand deals. In the eyes of HMRC, freebies sent for review, paid partnerships, and affiliate earnings all count as income. Even if a company just sends you products to try out (hello, free trainers!), the value of those goods may need to be declared as income if you’re expected to feature them in your content. Keep good records of everything you receive – it could make filling out your Self Assessment much less stressful!
What Counts as an Allowable Expense?
Being digital means you probably have expenses that someone with a more traditional side hustle wouldn’t even think about. Think camera equipment, software subscriptions (like editing tools), props for videos, or even part of your Wi-Fi bill if you work from home. These can often be claimed as business expenses – but only the portion used for your side hustle counts. So, if you use your laptop 50% for YouTube and 50% for Netflix binges, only half the cost is claimable.
Online Tutors: Don’t Forget Your Deductions
If you’re teaching lessons via Zoom or other platforms, things like lesson-planning materials, e-learning subscriptions, or a better headset are all potential allowable expenses. Just remember: keep every receipt!
Don’t Overlook VAT Thresholds
If your digital hustle takes off and your turnover crosses £85,000 per year (as of 2024), you’ll need to register for VAT. This can sneak up on creators who go viral or land bigger sponsorships, so monitor your income regularly.
A Few Friendly Tips
The world of creative and digital side hustles moves quickly – but when it comes to tax, slow down and keep clear records of both income and expenses. If in doubt, chat to an accountant who understands the quirks of digital earnings in the UK. That way, you can focus on creating awesome content without worrying about nasty surprises from HMRC later on!
7. Top Tips and Common Pitfalls
Ready to keep your UK side hustle on the straight and narrow? Here’s a handy round-up of tax-smart moves, plus the classic traps to avoid. I’m sharing these as someone who’s learned a thing or two the hard way!
Easy Wins for Staying Tax-Savvy
Keep Every Receipt (Seriously!)
No matter your hustle—Etsy crafts, food delivery, tutoring—keep those receipts and records. A simple folder or an app does wonders when it’s time for self-assessment.
Know Your Allowances
The UK has some generous schemes: the £1,000 trading allowance for casual earnings and the rent-a-room scheme for letting out space. Don’t pay more tax than you have to!
Register on Time
If your side gig earns over £1,000 in a tax year, register with HMRC as a sole trader pronto. It’s not as scary as it sounds, promise.
File Early, Stress Less
Don’t leave your self-assessment until the last minute. Filing early means no panics in January and gives you ages to budget for any tax bill.
Classic Mistakes Side Hustlers Make
Mistake: Mixing Business with Personal Money
This one trips up loads of new hustlers. Open a separate bank account—it makes tracking income and expenses so much easier.
Mistake: Forgetting About National Insurance
Your side hustle may mean you owe Class 2 or Class 4 National Insurance contributions. Check what applies and set aside money for it.
Mistake: Ignoring VAT Thresholds
If your turnover creeps over £85,000 (it happens!), you’ll need to register for VAT. Keep an eye on your numbers so you’re not caught off guard.
A Little Help Goes a Long Way
If you’re unsure about anything, don’t be shy about asking an accountant or checking gov.uk. The sooner you sort things out, the more time you’ll have to focus on growing your side business—and enjoying those extra pounds in your pocket!
