HMRC side hustle tax limit change

Nearly one in five people in Britain now earns money from a side hustle, according to a survey, as households increasingly look for ways to boost income alongside full-time work.

The research for Scottish Widows found side hustles are now widespread across genders and income levels, with 17% of women and 18% of men looking for extra ways to boost their income.

Key takeaways

HMRC side hustle tax limit change

Anyone earning under £1,000 from a side hustle does not need to pay tax on it. But anyone earning more than £1,000 must declare their earnings to HMRC.

The tax-free trading allowance has not changed since it was introduced in 2017, with NimbleFins research finding side hustle earners have paid hundreds of pounds more in tax than they should have had the threshold raised in line with inflation.

There is a change coming in in 2029 though.

From 2029, people earning up to £3,000 from side hustles will be able to report income digitally without completing a full Self Assessment tax return. HMRC says the change is designed to simplify reporting for people with small additional income streams - not to increase the tax-free allowance itself.

HMRC side hustle registration deadline

If you earn more than £1,000 from side hustles in a tax year, you must register for Self Assessment by October 5 following the end of that tax year. Missing the deadline can lead to penalties, even if you ultimately owe little or no tax.

HMRC has repeatedly warned that online selling platforms and gig economy apps are now sharing more data with tax authorities.

Side hustles UK

The Scottish Widows research found 18% of UK men and 17% of women questioned now have an additional income stream outside their main job.

Side hustles are no longer limited to younger workers or freelancers, with participation spread across age groups and income brackets.

People on lower incomes were particularly likely to use side hustle earnings for everyday living expenses, while higher earners were more likely to pocket the extra money to save or invest, according to the survey of 2,500 people aged 18-50.

Half of women with side hustles said they started one to increase their disposable income and one in 10 are hoping it becomes a full-time job.

Side hustle ideas UK

Popular side hustles vary by gender, according to the YouGov survey for Scottish Widows.

Women are more likely to earn extra cash through buying and reselling items online, while men more often report freelance work, such as writing, design or pet care.

Crucially, many of these activities generate taxable income even when done casually or alongside employment.

Some side hustle ideas include:

Side hustles at home

Online and home-based side hustles are among the fastest-growing types of additional income, partly because they require little upfront cost and can be done around existing jobs.

You may also be able to claim tax-deductible expenses linked to home-working on things like council tax and electricity bills. But only the business-related portion, and only if the costs are wholly and exclusively for work.

You may be able to claim a proportion of certain household bills, including:

The amount you can claim is normally based on:

For example, if one room out of five is used for work for half the week, you could claim a small percentage of those running costs.

However, working from home does not change tax liability - income still needs to be tracked, declared and taxed where applicable.

How to start a side hustle

It’s good practice for anyone starting a side hustle to:

If you earn more than £1,000 you will need to register for Self Assessment by 5 October following the end of the tax year, and submit a tax return by January 31, and pay any tax owed by that date.

For example, if you earn more than £1,000 from a side hustle between April 6 2025 and April 5 2026, you must register by 5 October 202 and pay your tax liability by January 31 2027.

From 2029, people earning up to £3,000 from side hustles will be able to report income digitally without completing a full Self Assessment return.

Some of the steps you may wish to tick off when starting a side hustle:

1. Choose a side hustle that fits your skills, time and home setup
2. Check whether you need any licences, insurance or permissions
3. Open a separate account or record to track side hustle income
4. Keep receipts and records of any allowable expenses
5. Monitor earnings against the £1,000 trading allowance
6. Register with HMRC if you go over the threshold or are required to file
7. Set aside money for tax as you earn, not at the end

Summary

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