Do you need to pay tax on your side hustle?

If you've turned a hobby into a side hustle, it's important to understand whether the extra income needs to be reported to HMRC.

From selling handmade wedding stationery and baking cakes to photography, videography or other freelance services, earning additional income could create a tax obligation.

The £1,000 trading allowance

If your gross trading income is more than £1,000 in a tax year, you may need to register for Self Assessment, complete a tax return and potentially pay tax on your profits.

Importantly, the £1,000 trading allowance applies to your combined trading income, rather than separately to each activity.

For example, if you earn money from cake-making alongside another freelance service, the income from both activities would generally need to be considered when determining whether you have exceeded the threshold.

What about selling unwanted items?

Simply selling your own unwanted possessions does not usually mean you are trading and will not normally need to be reported to HMRC.

However, if you regularly buy or make goods with the intention of selling them for a profit, or provide services in return for payment, HMRC may consider you to be trading.

Keeping accurate records of your income and expenses can make it much easier to understand your tax position and complete a Self Assessment return if one is required.

If you're earning money from a side hustle and aren't sure whether you need to declare it, speak to SJC, Chartered Accountants. Our team can help you understand your tax obligations and ensure you're reporting your income correctly.