From January 2024, Vinted, eBay, Etsy and Airbnb all report your earnings to HMRC automatically. If you have side income above £1,000, you owe tax. Find out exactly how much, and what to do about it.
HMRC gives every UK resident a £1,000 annual trading allowance. This means the first £1,000 of side hustle income each tax year is completely tax free, and you do not even need to register with HMRC. The tax year runs from 6 April to 5 April the following year, so timing matters. If you earned £900 from selling on Etsy by March, you could legitimately delay another £100 sale until after April 6th to keep the allowance fresh for next year.
Above £1,000, things change quickly. You must register for Self Assessment, you owe tax on your profit (income minus expenses), and you must file a tax return every January. The cliff edge is dramatic. Earning £999 means zero tax and zero admin. Earning £1,001 means full registration and ongoing reporting forever, even if your tax owed is just a few pounds. Many casual sellers genuinely do not realise this and find out only when HMRC contacts them, by which point penalties may have already started.
HMRC distinguishes between two activities that look similar but are taxed completely differently. Selling your own personal possessions is generally not taxable, even if you sell hundreds of items. Clearing out your wardrobe on Vinted, selling old furniture on Facebook Marketplace, or offloading unused gadgets on eBay falls into this category. You are reducing your stuff, not running a business.
Trading income is different. If you buy items specifically to resell for profit, make things to sell (handmade goods on Etsy, art commissions), or provide services (freelance work, tutoring, dog walking, food delivery), you are running a business in HMRC's eyes regardless of how small the activity is. The line is intent. Buying a car boot sale lot to flip on eBay is trading. Selling your old PlayStation is not.
Specifically taxable activities include freelance work, consulting, copywriting, design, tutoring, photography, content creation including OnlyFans and YouTube income, delivery driving (Deliveroo, Uber Eats, Just Eat), dog walking and pet sitting, cleaning services, market research panels above the trading allowance, and any handmade or resale business.
Once your side hustle income passes £1,000, HMRC adds your profit (not your gross income) to your main salary and taxes the total. Profit is calculated one of two ways, whichever gives the lowest taxable amount. Either you deduct your actual business expenses (equipment, materials, fees, mileage), or you deduct the full £1,000 trading allowance. You cannot claim both.
Your profit is then taxed at your highest marginal rate. If your main salary keeps you in the basic rate band (under £50,270 total), side income is taxed at 20 percent income tax plus 6 percent Class 4 National Insurance, totalling roughly 26 percent. If your combined income crosses £50,270, anything above that threshold is taxed at 40 percent income tax plus 2 percent NI, totalling 42 percent. The £100,000 to £125,140 band is the worst, where the personal allowance taper creates an effective 60 percent marginal rate.
Class 2 National Insurance, previously a small flat fee, became voluntary from April 2024 for most self employed earners. It is now only relevant if you specifically want to top up state pension contributions for a year where profits are very low.
HMRC lets you deduct any expense incurred wholly and exclusively for your business. For most side hustles, this list is bigger than people realise. Common claimable expenses include: equipment and software (cameras, laptops, design subscriptions), materials and stock for resellers, postage and packaging, marketplace fees (Etsy, eBay, Vinted seller fees), business mileage at 45p per mile for the first 10,000 miles each year, a portion of phone and internet bills if you work from home, advertising costs, and accountant or tax software fees.
For people working from home, you can claim £6 per week as a flat rate for use of home as office without needing receipts. Or you can calculate actual costs based on the proportion of your home used for business and the time spent. For most casual side hustlers, the £6 flat rate is simpler and the difference is small.
The single biggest mistake side hustlers make is failing to track expenses throughout the year. By January, when the tax return is due, most people have forgotten what they spent and end up overpaying tax by hundreds of pounds. Apps like Coconut, FreeAgent and QuickBooks auto categorise spending from a connected bank account, so the work happens automatically.
If your side hustle income passes £1,000 in a tax year (running 6 April to 5 April), you have until 5 October following the end of that tax year to register for Self Assessment. So if your income passed £1,000 between 6 April 2025 and 5 April 2026, you must register by 5 October 2026.
Once registered, you receive a Unique Taxpayer Reference (UTR) and must file a Self Assessment tax return by 31 January following the tax year. The same date is the deadline for paying any tax owed. Missing the registration or filing deadlines triggers automatic £100 penalties, with additional fines accruing the longer you delay.
Many people genuinely do not know they need to register until HMRC contacts them, often months or years later. Online marketplace data sharing rules now mean HMRC sees high volume seller data automatically, so the chance of side income being noticed has increased significantly. The safest approach is registering proactively as soon as you cross £1,000, even if the eventual tax owed is small.
Three concrete actions. One: tally your side income for the current tax year. Add up everything you have earned since 6 April. If you are above £1,000, register with HMRC at gov.uk/register-for-self-assessment. The process takes about 15 minutes and a UTR arrives within 10 working days.
Two: set up a tax savings account. Every time you receive side hustle income, transfer roughly 30 percent into a separate account (slightly more if you are a higher rate taxpayer). Treat it as money that already belongs to HMRC. By 31 January, when the tax bill arrives, you will have it ready instead of scrambling to find the cash.
Three: start tracking expenses immediately. Save receipts (photos in a dedicated phone folder are fine), note business mileage, and keep records of marketplace fees and equipment purchases. Even if you start mid year, every claimable expense reduces your tax bill. People who track properly typically pay 20 to 40 percent less tax than people who guess at the last minute.
Yes, if your total side hustle income is over £1,000 in a tax year, you must declare it to HMRC and may owe tax on it. The £1,000 figure is called the trading allowance and is the threshold below which most casual side income is tax free. Selling personal items you no longer want (like old clothes on Vinted or Depop) is generally not taxed at all, but if you are buying to resell at a profit it counts as trading income and must be declared.
Side hustle profit (income minus expenses) is added to your main salary and taxed at your highest marginal rate. For most people that is 20 percent basic rate income tax plus 6 percent Class 4 National Insurance, roughly 26 percent combined. Higher earners pay 40 percent income tax plus 2 percent NI on side income that pushes them into the higher band. Use this calculator to see your exact figure based on your specific situation.
The trading allowance lets you earn up to £1,000 per year from self employment, casual work or hobby income without paying tax or even needing to register for Self Assessment. If you earn more than £1,000 you must register with HMRC and file a tax return, but you can still use the £1,000 as a deduction instead of claiming actual expenses, whichever gives you the lower tax bill.
You must register for Self Assessment with HMRC by 5 October following the tax year in which your side income exceeded £1,000. The tax return is due by 31 January (online), and any tax owed must be paid by the same date. Missing these deadlines triggers automatic £100 penalties. Many people earning side income do not realise they need to register until HMRC contacts them, by which point penalties have already started.
From January 2024, online marketplaces including Vinted, eBay, Depop, Etsy and Airbnb are required to report user earnings to HMRC for sellers who exceed 30 transactions or earn more than around €2,000 per year. This means HMRC now automatically receives data on high volume sellers. Selling old personal items at a loss is still tax free, but if you are buying to resell at a profit, you must declare it.
You can claim any expense incurred wholly and exclusively for your business. Common allowable expenses include equipment and software, materials and stock, postage and packaging, marketplace fees (Etsy, eBay, Vinted), business mileage at 45p per mile, a portion of phone and internet bills, advertising costs, and accounting software. For working from home, you can claim a flat rate of £6 per week without needing receipts, or calculate actual costs based on the proportion of home and time used for business.