With the rising cost of living, more people are taking on side hustles to supplement their income. However, HM Revenue and Customs (HMRC) has issued a warning for anyone earning more than £1,000 a year from such activities. The Trading Allowance allows individuals to earn up to £1,000 in gross turnover from casual services or self-employment without declaring it, but exceeding this threshold requires registration and filing of a self assessment tax return.
Expenses can be claimed against tax, including costs for inventory, website, mobile phone, and broadband. For those working from home, a reasonable portion of household bills such as electricity and heating can be deducted. However, expenses must be 'wholly for the purpose of the business'—mixed-use items like a laptop used 50% for work can only claim 50% of the cost. Personal clothing, even for meeting clients, is generally not allowable, though actors may claim costumes and branded uniforms are permissible.
From April 2026, Making Tax Digital (MTD) will apply to self-employed sole traders and landlords with turnover of £50,000 or more. This requires using HMRC-approved accounting software and submitting quarterly returns alongside the annual self assessment. Many business bank accounts now include compatible software like Freeagent or Xero, simplifying the process.
The key deadline remains January 31 each year for submitting and paying the previous tax year's return. HMRC advises side hustlers to register promptly if earnings exceed the Trading Allowance and to keep accurate records to avoid errors or penalties.
