HM Revenue and Customs (HMRC) has issued a tax bill warning to individuals earning more than £1,000 from a side hustle. Anyone who gains extra income outside their regular job—such as renting property, creating online content, or selling goods—must register for Self Assessment and file a tax return if annual earnings exceed £1,000.
Tax-Free Trading Allowance
In the UK, everyone has a tax-free trading allowance of £1,000 on additional income outside primary employment. If earnings surpass this threshold, you must inform HMRC 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 reminded those with high side hustle earnings to complete the process. In a post on X, HMRC stated: "Unsure if you might need to complete a tax return? You may need to if you’re: newly self-employed, a landlord, a new partner in a business partnership, or earned more than £1,000 through a side hustle. Check using our free online tool."
When You Don't Need to Pay Tax
If your side hustle earns £1,000 or less per year, you don't need to pay tax. But if earnings exceed £1,000 annually, you must tell HMRC and may owe tax on the profit.
HMRC recommends checking guidance on 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.
Registration and Penalties
If you need to pay tax on additional income, register for Self Assessment by October 5. HMRC says: "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, you might be given a penalty."
You have a single £1,000 tax-free trading allowance per tax year. Earnings from different side hustles count toward this total. For example, earning £800 from content creation and £500 from crafts totals £1,300, exceeding the allowance, so you must inform HMRC and pay tax.
- Check if you need to tell HMRC about additional income.
- If tax is due, register for Self Assessment by October 5.
- Failure to pay correct tax may result in penalties.
- Late payments accrue interest.
Penalty Structure
If tax returns aren't submitted on time, you'll face an initial £100 fixed penalty, even if no tax is due or paid on time. Penalties increase over time:
- After three months: daily penalties of £10 per day, up to £900.
- After six months: 5% of tax due or £300, whichever is higher.
- After 12 months: another 5% or £300 charge.
Late payment penalties include 5% of unpaid tax at 30 days, six months, and 12 months. Interest is also charged on overdue amounts.
Customers unable to meet the tax return deadline should inform HMRC before January 31. The department says it will treat those with reasonable excuses fairly.
