How to Report Side Hustle Income to HMRC

If you earn money outside your main job — freelancing, selling things online, tutoring, renting out a room — HMRC wants to know about it. Not all of it, though. The first £1,000 is tax-free under the trading allowance, and you do not even need to report it. Above that, you need to file a self-assessment tax return.

This is not complicated. It is just unfamiliar if you have only ever been on PAYE.

The £1,000 trading allowance

Every UK taxpayer gets a £1,000 trading allowance each tax year. If your total side income (before expenses) is £1,000 or less, you owe nothing and do not need to tell HMRC.

If you earn more than £1,000, you have two options:

1. Use the trading allowance — Deduct £1,000 from your income and pay tax on the rest. No need to track expenses.
2. Deduct actual expenses — Keep records of what you spent (software, materials, travel) and deduct those instead.

Option 2 is better if your expenses are over £1,000. Option 1 is simpler if they are not.

There is a separate £1,000 property allowance if you rent out property, and it works the same way. See GOV.UK trading allowance.

When you need to register for self-assessment

You must register with HMRC if your side income exceeds £1,000 in a tax year (6 April to 5 April). The deadline to register is 5 October after the end of that tax year.

So if you started a side hustle in January 2026 and earned over £1,000 by 5 April 2026, you need to register by 5 October 2026.

Register online at GOV.UK self-assessment registration. HMRC will send you a Unique Taxpayer Reference (UTR) by post within about ten working days. You need this to file your return.

How to file your tax return

Once registered, the process each year is:

1. Log in to HMRC online services (or use commercial software).
2. Report your employment income — Your P60 from your employer covers this.
3. Report your side income — Total earnings and either the trading allowance or itemised expenses.
4. Submit — HMRC calculates what you owe.
5. Pay — By 31 January following the end of the tax year.

Deadlines:

• Paper returns: 31 October
• Online returns: 31 January
• Payment: 31 January

Miss the 31 January deadline and you get an automatic £100 penalty, even if you owe nothing.

What tax will you actually pay?

Your side income is added on top of your employment income. Whatever tax band you are in determines the rate.

Say you earn £30,000 in your day job and make £5,000 from freelance work. Your total income is £35,000. After your £12,570 personal allowance, you have £22,430 of taxable income — all within the basic rate band. So your freelance income is taxed at 20%.

If you use the trading allowance: tax on £4,000 (£5,000 minus £1,000) = £800.

If your expenses were £1,500: tax on £3,500 (£5,000 minus £1,500) = £700. Worth keeping those receipts.

You will not pay employee National Insurance on self-employed income, but you may owe Class 2 (£3.45/week, often negligible) and Class 4 NI (6% on profits between £12,570 and £50,270, 2% above that) if your profits are high enough.

Keeping records

HMRC requires you to keep records for at least five years after the 31 January submission deadline. You need:

• Invoices or payment records for all income
• Receipts for expenses you are claiming
• Bank statements showing the transactions

A spreadsheet works. So does an app like FreeAgent or QuickBooks Self-Employed. The format does not matter as long as the numbers are right and you can produce them if HMRC asks.

Common mistakes

Not reporting because "it's just a bit on the side." HMRC does not care how casual it feels. Online platforms like eBay, Etsy, and Airbnb now share seller data directly with HMRC. If you are over £1,000 and not reporting, they will probably find out.

Mixing up turnover and profit. The £1,000 trading allowance applies to gross income (before expenses). But if you choose to deduct expenses instead, you only pay tax on profit.

Forgetting to set money aside. Self-assessment tax is due in a lump sum (or two payments on account). If you earn £5,000 on the side and owe £800 in tax, that bill arrives all at once in January. Put 20–30% of your side earnings into a savings account as you go.

Next steps

If you are already earning over £1,000 from a side hustle and have not registered, do it now. The longer you leave it, the more interest and penalties stack up. HMRC is more lenient when you come forward voluntarily than when they come to you.

Use our salary calculator to see how your combined income affects your overall take-home pay — it handles the tax bands across both income sources.