HMRC Tax for Side Hustles: What You Need to Declare

If you earn more than £1,000 from a side hustle in a tax year, you usually need to tell HM Revenue and Customs and file a Self Assessment tax return.

Whether you're selling handmade jewellery on Etsy, picking up freelance work in the evenings, or renting out a spare room, you might be earning more than you realise – and HMRC might want their cut.

Here's everything you need to know about HMRC tax for side hustles.

Key points

• You can earn up to £1,000 from a side hustle tax-free 💷
  The trading allowance lets you earn up to £1,000 per tax year from self employed or casual work before you need to declare it to HMRC. There's also a separate £1,000 property allowance for rental income.
• Many different income streams count as taxable side hustle income 🛍️
  Freelancing, selling products online, gig economy work, content creation, and renting out property can all count as taxable income. Selling old personal belongings occasionally is usually not taxable, but buying or making items to sell regularly often is.
• Crossing the threshold means you need to register for Self Assessment 📋
  Once your side hustle income goes above the allowance, you'll typically need to register with HMRC, file a Self Assessment tax return, and pay any tax owed. Missing deadlines can lead to automatic fines, so staying organised matters.
• Claiming business expenses can reduce your tax bill 🧾
  You can deduct allowable business expenses like software, equipment, travel, marketing, and home office costs before calculating tax. Keeping clear records and separating business finances from personal spending makes this much easier.
• Making Tax Digital is changing how side hustle taxes work 💻
  From April 2026 onwards, many self employed people and landlords will need to submit digital quarterly tax updates through compatible software. ANNA helps side hustlers stay compliant with automated bookkeeping, receipt capture, real-time tax estimates, deadline reminders, and direct Self Assessment filing in one place.

Tax-free allowances for side hustles

Not every bit of extra income triggers a tax bill. HMRC allows you to earn small amounts on the side before you need to pay tax or report your earnings.

The trading allowance covers up to £1,000 of income from self employment or casual work per tax year. If you earn under this threshold from your side hustle, whether that's odd jobs, selling stuff you've made, or occasional freelance work, you don't need to declare it or pay tax on it.

There's also a separate property allowance of £1,000 for income from renting out property or land. If your landlord income is less than that, you're in the clear.

Cross either of those thresholds, though, and you'll need to register with HMRC and file a Self Assessment tax return. That applies even if your side hustle income is relatively modest – it's the threshold that matters, not your profit.

💡 Did you know?

ANNA can handle your Self Assessment for you, filing included.

For a limited time, you can file your 2025/26 Self Assessment for free through ANNA, even if you already registered with another provider. How? ANNA will refund the filing fee you paid when you switch.

Making Tax Digital for side hustles

HMRC is in the process of rolling out Making Tax Digital for Income Tax (MTD for ITSA), which will change how self employed people and landlords report their income.

Rather than filing one annual Self Assessment return, you'll submit quarterly updates to HMRC digitally, plus a final end-of-year declaration.

The rollout is coming in phases:

• April 2026: Self employed people and landlords earning over £50,000
• April 2027: Self employed people and landlords earning over £30,000
• April 2028: Self employed people and landlords earning over £20,000

If your side hustle income (combined with any other self employment or property income) takes you above these thresholds, you'll need to use MTD-compatible software. It's a good idea to get ahead of this now rather than scrambling to change your setup later.

💡 Did you know?

ANNA is fully MTD-compatible – and it's free. You won't need to pay for separate accounting software or switch platforms when the deadlines hit. If you're already using ANNA's business account, you're sorted.

Taxable income: What pushes you above the threshold

HMRC's definition of taxable income is broader than many people expect. It's not just your main salary that counts.

Here's a list of all taxable income sources:

• Self employed work and freelancing: Copywriting, graphic design, tutoring, coding, photography, consulting. If someone pays you for a skill, that's income.
• Online sales: While selling old things you already own (clearing out your wardrobe, for instance) generally isn't taxable, reselling is. If you're buying items to resell or regularly selling items you've made, HMRC treats it as a trade.
• Renting out property or a room: This includes Airbnb, spare rooms, driveways, and storage space. The Rent a Room scheme lets you earn up to £7,500 a year tax-free from letting a furnished room in your home, which is important for live-in landlords.
• Gig economy platforms: Income from platforms such as Deliveroo, Uber, TaskRabbit, Fiverr, and similar counts as self employment income.
• Content creation: If you earn YouTube ad revenue, brand sponsorships, affiliate income, or anything from content you create, you'll need to declare it.
• Cashback and interest: Most cashback from apps and credit cards isn't taxable, but savings interest above your Personal Savings Allowance is.

HMRC tax for side hustles: The numbers to know

Here's a quick breakdown of the key thresholds for the 2026/27 tax year:

Most of these figures are frozen until April 2031.

Keep in mind that these allowances can stack in some cases.

For example, if you have a full-time job and a freelance side hustle, your Personal Allowance applies to your total income, so if your employment income already uses it up, your side hustle income gets taxed from the first pound.

How to register and file tax for side hustles

If you need to declare income from a side hustle, it's typically done through Self Assessment.

Here's how the process works:

• Register with HMRC: The registration deadline is 5 October in the tax year after you started earning. So, if you started your side hustle in the 2026/27 tax year (which runs from 6 April 2026 to 5 April 2027), you need to register by 5 October 2027.
• File your tax return: The filing deadline is 31 January 2028 if you're filing online, or 31 October 2027 if you're filing a paper return.
• Pay what you owe: The payment deadline is 31 January 2028. If your tax bill is over £1,000, you'll also make payments on account, which are advance payments towards your next tax bill. These payments are due in January and July 2028.

Miss any of these deadlines, and you'll get an automatic £100 fine, with further penalties the longer you leave it.

🧠 Good to know

ANNA's Auto Accountant tracks your deadlines and nudges you when action's needed, so the 31 January date doesn't creep up on you.

Can you claim expenses?

You can deduct legitimate business expenses from your income before working out how much tax you owe, which can make a real difference to your bill.

Allowable expenses need to be 'wholly and exclusively' for your business. Some common ones for side hustlers include:

• Equipment and tools you use for the work (a camera for a photography side gig, for example)
• Software and subscriptions directly related to the business
• Materials and stock
• Home office costs, if you work from home regularly (you can claim a flat rate or calculate the actual proportion of household bills used for work)
• Marketing costs, including website hosting and ads
• Travel directly related to work (commuting doesn't count)
• Professional fees, such as accountancy costs

If something is partly personal and partly business, like your phone, for instance, you can only claim the business proportion.

💡 Did you know?

ANNA's Receipt Scanner lets you photograph receipts on the spot and categorises your expenses automatically. By the time you're ready to file, you've already got a clean record of everything claimable – no digging through old emails or shoeboxes full of paper.

For how long do you need to keep records?

HMRC expects you to keep records of your income and expenses for at least five years after the 31 January filing deadline.

You should keep:

• Invoices you've issued
• Receipts for expenses
• Bank statements
• Records of income received (even cash payments)
• Mileage logs (if you're claiming travel costs)

A dedicated business account makes this much easier. When your business income and personal spending are in separate accounts, you're not digging through months of transactions in January trying to figure out what was work-related and what was a Friday night takeaway.

🧠 Good to know

ANNA's business account is built for exactly this. It keeps your side hustle money separate from your personal finances, logs every transaction automatically, and connects directly to your tax records, so your bookkeeping is always up to date.

How ANNA takes the tax stress out of your side hustle

Running a side hustle means wearing a lot of hats, but 'personal accountant' doesn't have to be one of them.

ANNA can make your tax life more manageable, keep everything in one place, and work mostly on autopilot.

Here's what you get with ANNA:

• Convenient Business account: A dedicated business account keeps your side hustle income separate from your personal money. Every transaction is logged automatically, and you can open the account in minutes – no branch visits, no paperwork.
• Smart Auto Accountant: ANNA's auto accountant watches your income and expenses as they come in, categorises everything, and keeps a running picture of what you owe. It spots claimable expenses you might have missed and flags anything that needs attention before it becomes a problem.
• Self Assessment filing: When it's time to file, ANNA pulls your figures together and submits your Self Assessment return directly to HMRC for free, right in the app. No need for separate portals or manual data entry.
• Receipt capture: As soon as you get a receipt, you can photograph it with your phone. ANNA stores, reads, and matches it to the right expense category. By the time your tax return comes around, your records are already in order.
• Deadline reminders: ANNA keeps track of key HMRC dates, such as registration, filing, and payment deadlines, and nudges you well ahead of time. The 31 January deadline will never be a surprise again.
• 24/7 support: Got a tax question at 11 pm the night before a deadline? ANNA's support team is on hand around the clock.

Open an ANNA account and get your side hustle finances sorted from day one.