Households have been issued a tax bill alert reminder by HM Revenue and Customs (HMRC) regarding extra earnings from side hustles. Anyone earning more than £1,000 annually outside their regular job—such as renting property, creating online content, or selling goods—must register for Self Assessment and file a tax return.
Key Details About the Trading Allowance
In the UK, everyone has a tax-free trading allowance of £1,000 for additional income beyond their primary employment. If earnings exceed this threshold, you must notify HMRC. This applies to income from various sources, including online platforms and selling goods.
People who meet the £1,000 extra earnings threshold must declare this by registering as self-employed and submitting a Self Assessment tax return. While the deadline for the 2026/27 tax year is January 31, 2027, HMRC has issued an early reminder to ensure compliance.
What You Need to Know
If your side hustle earns £1,000 or less per year, no tax is due. However, if earnings exceed £1,000 annually, you must inform HMRC and may need to pay tax on the profit. HMRC recommends checking the guidance about selling online and paying taxes on GOV.UK. A link is also available on the HMRC app under the 'news' section in the 'communication' tab to help determine if your activity is considered a trade.
If you need to pay tax, you must register for Self Assessment by October 5. HMRC states: "Extra earnings are your responsibility to tell HMRC about, not your main employer's. Income from side hustles isn't included on your payslip. If you don't tell HMRC about those extra earnings you might be given a penalty."
The £1,000 tax-free trading allowance applies per tax year, and earnings from different side hustles all count toward this limit. For example, earning £800 from content creation and £500 from selling crafts totals £1,300, exceeding the allowance and requiring you to inform HMRC.
Penalties for Non-Compliance
If you don't pay the correct tax, you may face penalties. Late payments accrue interest, and the longer you delay, the more you may owe. For late tax returns, an initial £100 fixed penalty applies, even if no tax is due. After three months, daily penalties of £10 per day (up to £900) are added. After six months, a further penalty of 5% of tax due or £300 (whichever is higher) is imposed. After 12 months, another 5% or £300 charge applies. Late payment penalties include 5% of unpaid tax at 30 days, six months, and 12 months, plus interest on the amount owed.
Customers unable to meet the tax return deadline should inform HMRC before January 31. The government department states it will treat those with reasonable excuses fairly.
