Tax Tips for Your Side Hustle: What You Need to Know

Got a side hustle? Whether you’re selling vintage clothes online, freelancing, or building up a mini-empire on the side, there’s one thing to keep in mind—your extra income could mean extra taxes! Here’s a breakdown to keep things simple and stress-free.

The Basics: What Counts as Taxable Income?

Any money you make from your side hustle counts as income in the eyes of HMRC. Even if it’s not your main gig, the UK government still wants to know about it. If your side hustle income exceeds certain thresholds, you might need to file a self-assessment tax return, even if you’re already paying tax on a primary job.

Quick Tip: Filing your self-assessment tax return keeps you in HMRC’s good books and helps you avoid any unexpected penalties.

Tax-Free Allowances: What Can You Earn Tax-Free?

The UK has tax-free allowances that let you earn a bit of extra cash without owing taxes:

1. Personal Allowance: This is £12,570 per year, and it’s the amount you can earn tax-free from all your income sources combined (including your main job and side hustle).

2. Trading Allowance: The UK also provides a £1,000 trading allowance for side hustles. This means if you earn less than £1,000 a year from your side gig, you don’t have to report it or pay tax on it.

Example: If you’re already working a main job and earn an extra £800 annually selling handmade crafts, you don’t need to pay tax on it thanks to the £1,000 trading allowance. But if you make £1,500 from your side gig, the extra £500 is taxable.

Keep It Simple: How Much Can You Earn Before You’re Taxed?

• Income Under £1,000 a Year? You’re safe—no need to pay tax or report it.

• Income Over £1,000 a Year? Once you cross that threshold, you need to report your earnings. This means registering for a self-assessment tax return with HMRC and paying tax on any income over your allowances.

New Rules Alert: Increased Tracking of Side Hustle Income

Recently, HMRC has tightened its grip on side hustle income by requiring digital platforms (like websites and apps where you might sell your products or services) to report user incomes. So, if you’re making steady sales online, HMRC will have access to that data, and they’ll know if your income crosses reporting limits.

Stay Informed and Organised

Keeping on top of tax-free limits and staying aware of what’s taxable will save you time, stress, and potential penalties. Here are a few simple steps to stay on track:

• Track Your Earnings: Use a simple spreadsheet or app to log your side hustle income and expenses.

• Understand Reporting Thresholds: Know when you need to report income and when you’re in the clear.

• File on Time: If you need to submit a self-assessment tax return, make sure to hit those deadlines to avoid late fees.

Need Help with Your Side Hustle Taxes?

Taxes don’t have to be daunting. If you’re feeling overwhelmed or just want some guidance, Pandey & Co. is here to help. Reach out for tips, support, or a hassle-free self-assessment process, so you can focus on growing your side hustle, stress-free!