Self employed
Selling online or earning on the side? Here is when HMRC taxes a side hustle, when it does not, and what the new platform reporting rules mean for you.
Side hustles have never been more popular, from selling on Vinted and eBay to driving, letting a room, freelancing or making things to sell. What has changed is that HMRC now receives data directly from the platforms people use, so the old assumption that a bit of extra cash will go unnoticed no longer holds. This guide explains in plain English when a side hustle is taxable, when it is not, and exactly what to do, with worked examples for the 2026/27 tax year.
Everyone can earn up to 1,000 pounds of gross trading or casual income in a tax year without paying any tax on it, and usually without even telling HMRC. This is the trading allowance, and it applies to your total income before expenses, not your profit. So if your side hustle brings in 900 pounds across the whole year, you are inside the allowance and there is normally nothing to report. The moment your gross income goes above 1,000 pounds, the position changes and you need to look more closely.
There is a crucial difference between clearing out your own belongings and running a small business. If you sell personal items you already owned, such as old clothes, a used phone or unwanted gifts, you are not trading and there is usually no Income Tax to pay, however much the platform reports. Selling second hand personal possessions is only ever caught by Capital Gains Tax, and even then most single items under 6,000 pounds are exempt. Trading is different. If you buy things in order to sell them at a profit, make items to sell, or provide a service, that is a business in the eyes of HMRC, and the profit can be taxable.
For example, clearing your wardrobe on Vinted and raising 800 pounds from clothes you once wore is not taxable, because you are not trading. But buying job lots of trainers to flip for profit, or knitting jumpers to order, is trading, and once it goes over the trading allowance it needs to be reported.
This is the change that has put side hustles in the headlines. Digital platforms, including Airbnb, eBay, Vinted, Etsy, Amazon, Deliveroo, Uber and many more, are now required to collect details of their sellers and report them to HMRC. The platform has to report you if in a calendar year you make more than 30 sales or you receive more than around 1,700 pounds through it. You should receive a copy of the information that is sent. It is vital to understand that being reported does not automatically mean you owe tax. The report is simply data. Whether there is tax to pay still depends on whether you are trading and whether you have made a profit above the trading allowance.
If your gross trading income for the year is above 1,000 pounds, you generally need to register for self assessment and report it. You must register by 5 October following the end of the tax year in which you started, then file your return and pay any tax by the following 31 January. On your profit you pay Income Tax at your usual rate and, if the profit is high enough, Class 4 National Insurance as well. Registering is straightforward, and doing it on time avoids penalties.
Suppose you have a full time job paying 30,000 pounds, and on the side you sell handmade candles that bring in 6,000 pounds in the year, with 1,500 pounds of costs for wax, wicks and postage. Your taxable profit is 4,500 pounds. Because your salary already uses up your personal allowance and sits in the basic rate band, the 4,500 pounds is taxed at 20 per cent, which is 900 pounds, and you also pay a small amount of Class 4 National Insurance on the part of the profit above the threshold. You would report all of this on a self assessment return for the year.
When you are above the trading allowance you have a choice. You can deduct your actual business expenses from your income, or you can simply deduct the 1,000 pound trading allowance instead, whichever leaves you better off. If your costs are low, the flat 1,000 pound allowance often wins. If your costs are high, claiming the real figures is better. You cannot do both, so it is worth working out each way before you file.
Many side hustlers also have a normal job taxed under PAYE. Your side hustle profit is added on top of your employment income, so it is taxed at whatever rate you have already reached. If your job has used up your basic rate band, your side hustle profit could be taxed at 40 per cent, which surprises people. It is sensible to set aside roughly a third of your side hustle profit for tax and National Insurance as you go, so the January bill is never a shock.
Two changes are worth knowing about. First, Making Tax Digital for Income Tax now applies to sole traders and landlords with income above 50,000 pounds, who must keep digital records and send quarterly updates, and the threshold falls over the following years. Second, the Government has announced that from the 2029/30 tax year people with trading income under 3,000 pounds gross will no longer need to file a return, although this is not yet in force, and tax may still be due even when a return is not required.
We help side hustlers work out whether they are trading at all, register with HMRC if they need to, claim the right expenses or allowance, and file a clean, correct return. If you have had a letter about online sales, or you are worried you should have declared something in the past, we can help you put it right calmly and on the best terms. Book a free call back and we will tell you exactly where you stand.
Once you are above the trading allowance and reporting your profit, you can deduct the genuine costs of running the side hustle. Common examples include the cost of stock and raw materials, postage and packaging, platform and payment fees, advertising, software subscriptions, and a reasonable share of your phone and internet bills. If you use part of your home to run the side hustle you can claim a proportion of your household costs, or the simpler flat rate that HMRC allows. If you use your own car for business journeys you can claim 45 pence a mile for the first 10,000 miles. Every pound of genuine expense reduces your taxable profit, so it pays to keep every receipt.
Good records make a side hustle far less stressful. Keep a simple list of your sales and your expenses, hold on to receipts and invoices, and it helps enormously to run the side hustle through a separate bank account so business and personal money do not get mixed up. You should keep your records for at least five years after the filing deadline, because HMRC can ask to see them. None of this needs expensive software when you are small, although once you grow, simple bookkeeping software soon pays for itself.
If you realise you should have declared side hustle income in earlier years, it is much better to come forward than to wait for HMRC to find you, especially now that the platforms are reporting. HMRC has a digital disclosure service that lets you put things right, and the penalties are far lower when you volunteer than when HMRC catches up with you first. We help people make these disclosures calmly and on the best possible terms, so a worry that has been hanging over them is finally dealt with.
Income Tax is not the only charge on a self employed side hustle. Once your profits pass the small profits threshold you also pay Class 4 National Insurance, currently at 6 per cent on profits between the lower and upper limits and 2 per cent above. Class 2 National Insurance, which used to be a separate flat charge, has largely been reformed so that most self employed people now get their National Insurance record credited through their profits without a separate bill. We make sure the right National Insurance is worked out alongside the Income Tax.
Most side hustles start as a sole trader, which simply means reporting the profit on your self assessment return. This is the easiest way to begin and is right for the great majority of side hustles. Setting up a limited company only tends to make sense once profits are larger and you are keeping money in the business, because a company brings more admin and filing. We are happy to talk through which suits you, and there is no need to rush into a company too early.
People often ask where a hobby ends and a taxable business begins. HMRC looks at what are called the badges of trade, which include whether you intend to make a profit, how often you sell, whether you buy things specifically in order to sell them, and how businesslike your activity is. Selling the odd unwanted item is not trading. Regularly buying and selling for profit is. If you are not sure which side of the line you are on, it is worth a quick check, because the answer decides whether there is any tax to pay at all.
Not if you are simply selling your own used belongings, as that is not trading. You only pay Income Tax if you are trading, which means buying to resell, making items to sell or providing a service, and your gross income goes above the 1,000 pound trading allowance.
It lets you earn up to 1,000 pounds of gross trading or casual income in a tax year tax free and usually without telling HMRC. It applies to income before expenses. Above 1,000 pounds you normally need to register for self assessment.
No. Platforms must report sellers who make more than 30 sales or receive more than around 1,700 pounds in a year, but the report is only data. Whether you owe tax depends on whether you are trading and whether you made a profit above the allowance.
If your gross trading income is above 1,000 pounds, register for self assessment by 5 October after the end of the tax year you started, then file and pay by the following 31 January.
We work out whether you are trading, register you if you need it, and file a clean return. Book a free call back and we will tell you exactly where you stand.