In our previous article, we mentioned that starting this year, HMRC will require multiple digital platforms to report user income information.

The most widely affected digital platforms include online trading platforms such as Airbnb, eBay, and Vinted.

This means that those who have not declared their online income to HMRC may face tax bills or even substantial fines.

Side Hustle Tax

If you’re considering starting a side hustle while working full-time in the UK, you need to understand the side hustle tax.

Examples of participating in a side hustle include:

  • Working as a full-time accountant in a company and selling second-hand furniture on eBay outside of working hours.
  • Holding a part-time customer service role in an accounting firm and renting out your house on Airbnb outside of working hours.
  • Being a full-time driver and providing pet care services on an online pet platform outside of working hours.

HMRC will differentiate between full-time and side hustle income based on the amount earned.

Usually, if your income for a tax year is less than £1,000, you do not need to register as a sole trader or declare this income to HMRC.

side hustle

Determining Your Need to Pay Tax for Side Hustles

In the UK, everyone receives a £1,000 tax-free trading allowance for extra income earned outside of their main employment.

If you work for a company and your side hustle income is less than £1,000, you don’t have additional tax obligations.

If you engage in a side hustle and have additional income exceeding £1,000 in a fixed tax year, you need to pay tax on it.

Additionally, if you have any other special circumstances, please contact our tax team for free consultation.

How to Register Your Side Hustle

Once you determine that your side hustle needs to be declared and taxed, you need to register it with HMRC.

First, choose your business type, such as a sole trader or a limited company.

If you decide on sole trader as your primary business, follow the process on the government’s official website.

You’ll also need to register for self-assessment and fulfill your tax obligations in subsequent self-assessment tax returns.

side hustle

Consequences of Not Paying Side Hustle Income Tax

If you are deemed liable for side hustle taxes but fail to report and pay income tax to HMRC, you may face fines once identified by HMRC.

Failure to pay taxes on time can also accumulate interest, so avoiding any tax arrears can prevent further penalties.

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