Over the last few years, the number of people generating additional income through ‘side hustles’ has grown significantly across the UK.
For some, it begins as a hobby or passion project. For others, it is a way to supplement household income during a period of rising living costs. Increasingly, we are seeing individuals earning money through online selling, freelance work, content creation, Airbnb rentals, consulting, tutoring, dog walking and many other forms of secondary income.
However, as side hustles become more common, HMRC is also increasing its focus on ensuring that this income is reported correctly and taxed appropriately.
Many people are still unclear about when a side hustle becomes taxable, whether they need to complete a Self Assessment tax return and how upcoming changes may affect them. At Richard Riley & Associates, we are seeing growing numbers of individuals seeking clarity around their obligations and how best to stay compliant while managing additional income streams efficiently.
When Does a Side Hustle Become Taxable?
One of the biggest misconceptions surrounding side hustles is the belief that small amounts of income “do not count” for tax purposes. In reality, the rules are more nuanced.
Currently, individuals in the UK benefit from a £1,000 trading allowance. This means that if your total trading income from side hustles is £1,000 or less during a tax year, you generally do not need to report it to HMRC or pay tax on it.
However, once your trading income exceeds £1,000, you may need to register for Self Assessment and submit a tax return.
Importantly, this applies to your total combined side hustle income rather than each individual activity separately. For example, if you earn £700 from online selling and £500 from freelance work, your combined trading income would exceed the threshold.
HMRC will also consider the nature of the activity itself. Selling unwanted personal possessions occasionally is generally very different from buying or creating items with the intention of making a profit on a regular basis.
HMRC has recently launched its ‘Tax Help for Hustles’ campaign to help individuals better understand whether they may need to pay tax on income generated through side hustles and online platforms. The campaign specifically targets people earning money through:
- online selling
- content creation
- freelance work
- renting out property or rooms
- dog walking and other services
The campaign highlights that many people may have tax obligations without realising it, particularly where side income is becoming more regular or profitable.
HMRC Has Greater Visibility Than Ever Before
Another important development is the increasing amount of information being shared directly with HMRC by online platforms.
Digital marketplaces and platforms such as eBay, Vinted, Etsy and Airbnb are now required to provide certain seller data to HMRC under international reporting rules.
This does not automatically mean tax is owed in every case. Many people selling second-hand personal items will not have any tax liability at all.
However, it does mean that HMRC has far greater visibility over online income than many people realise.
As a result, maintaining accurate records and understanding your reporting obligations has become increasingly important for anyone generating additional income online.
A Simpler System Is Coming for Smaller Side Hustles
In response to growing concerns around administrative burdens, the Government has announced plans to simplify the reporting process for individuals with smaller side hustle incomes by 2029.
Under the proposed changes, individuals earning between £1,000 and £3,000 from side hustles will eventually no longer need to complete a full Self Assessment tax return. Instead, HMRC plans to introduce a simpler online reporting system allowing people to declare income and pay any tax due through a streamlined digital service.
This change is expected to remove hundreds of thousands of people from the Self Assessment system altogether.
It is important to understand, however, that this does not mean the first £3,000 of side hustle income will become tax-free.
The existing £1,000 trading allowance remains unchanged. Income above this level may still be taxable depending on your wider income position and personal circumstances.
At present, the new simplified reporting system has not yet been introduced, meaning the current rules still apply for now.
Making Tax Digital Is Also Approaching For Some
Alongside changes to Self Assessment, many side hustlers and self-employed individuals will also need to prepare for Making Tax Digital (MTD) for Income Tax.
From April 2026, individuals with qualifying self-employed or property income exceeding £50,000 will be required to comply with Making Tax Digital requirements. This threshold then falls to £30,000 next year and £20,000 the year after, catching even more people.
This will involve:
- maintaining digital financial records
- using compatible software
- submitting quarterly updates to HMRC
- completing an end-of-year finalisation process
For individuals whose side hustle income is growing quickly, this is particularly important.
Many side businesses that begin casually can become substantial sources of income over time, especially in areas such as online retail, consulting, content creation and property income.
Preparing early for digital record keeping and more regular reporting can help avoid unnecessary stress later.
The Importance of Good Record Keeping
One of the most common problems we encounter is individuals failing to keep adequate records of their side hustle income and expenses.
Good record keeping is essential for:
- calculating taxable profits accurately
- claiming allowable expenses correctly
- responding to HMRC queries if required
- preparing for future digital reporting obligations
Even relatively small side hustles can quickly become complicated when combined with employment income, rental income, dividends or other investments.
Maintaining clear records from the outset usually makes things significantly easier in the long term.
Seeking Advice Early Can Prevent Costly Mistakes
For many people, side hustles start informally and evolve gradually over time. As a result, it is easy to underestimate when tax obligations begin to apply.
Seeking professional advice early can help you:
- understand whether you need to register for Self Assessment
- identify allowable expenses
- avoid penalties or missed deadlines
- prepare for Making Tax Digital
- structure growing income streams efficiently
As HMRC continues modernising its systems and increasing visibility over digital income, proactive planning and compliance are becoming more important than ever.
At Richard Riley & Associates, we work closely with self-employed individuals, landlords, business owners and those with additional income streams to help ensure their tax affairs remain accurate, compliant and efficiently managed.
If you are earning income through a side hustle and are unsure about your reporting obligations, now is an excellent time to review your position before future changes come into effect.