Recent research shows that around 44% of Brits have a ‘side hustle’ in 2023. Essentially, a side hustle is another income stream aside from a main job. This figure jumps to 76% of Gen Z (those born between 1997 and 2012), which is more than any other generation.

With ongoing cost-of-living pressures and inflation figures still high, it’s no wonder that people across all demographics are trying to generate some extra money on an ongoing basis. 

However, depending on what form your side hustle takes and how much you make from it, there can be tax implications that you need to consider. 

For those people who have an employed role, where tax and National Insurance is paid via PAYE, working out the tax and other deductions isn’t something you need to worry about or get involved in, as that’s handled my your employer’s payroll system. However, if you turn over more than £1,000 during a tax year (which runs 6th April one year to 5th April the following year), you will need to declare this income to HMRC. 

You do this by registering as self-employed and submitting a self-assessment tax return. Take a look at our guide to doing your first tax return

Why is there a £1,000 limit on earnings from side hustles before paying tax?

HMRC gives everyone in the UK a tax-free trading allowance of £1,000 each tax year. This means that if your side hustle generates £1,000 or below, you don’t need to declare it or take any action. 

If your side hustle brings in more than this, you will need to declare it and complete a self-assessment tax return. The deadline for registering as self-employed is the 5th October after the tax year in which you first generate over £1,000 through your side hustle. So, if you started a side hustle in May 2023, and it brought in more than £1,000 by 5th April 2024, you would need to register for self-assessment with HMRC by 5th October 2024. You would then complete a self-assessment tax return before the deadline of 31st January 2025 for the 2023/24 tax year and pay any income tax due. 

HMRC will calculate any taxes that you owe, taking into account your employed role and the tax already paid via PAYE. You will need to enter details of this on your self-assessment return, so make sure you keep hold of your p60, which your employer should provide to you each year, detailing how much you have earned and taxes paid through that job. 

Do I have to pay tax if my side hustle involves selling my belongings? 

If your side hustle is simply selling second-hand items that you previously bought for yourself, then you won’t need to pay tax on this. However, if you buy items purely with the intention of selling them on afterwards, that could be considered a business and you would be liable for tax on profits if you generate more than the £1,000 threshold. 

What to do if you think your side hustle will make more than £1,000 a year

If you have a side hustle or are thinking of starting one and you expect it to make you more than the trading allowance threshold, you should make sure that you keep all records of income and outgoings to do with your side hustle, even if you haven’t yet registered it with HMRC. Accurate record keeping is essential to ensure that the information on your tax return is correct. If you are found to be providing inaccurate details to HMRC, even accidentally, there can be serious consequences, including fines. 

Need some help with your side hustle bookkeeping or tax returns?

If you’ve never been self-employed before then the process of self-assessment can seem very daunting, as can the idea of having to keep records of everything to do with your side hustle. While it’s possible to handle this yourself, many people prefer to use an experienced bookkeeping service instead to help ensure everything is done properly and is accurate. 

Get in touch with Pennington Williams if you would like to use our bookkeeping service or any other help with your accounts or tax returns. 

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