HM Revenue & Customs (HMRC) has issued a stark warning to millions of Britons, urging anyone with undeclared income from side hustles, online sales, or freelance work to come forward immediately or risk severe financial penalties.
The tax authority is intensifying its crackdown on the 'hidden economy,' leveraging sophisticated technology to track down those who haven't reported their full earnings. Failure to disclose this income could result in fines of up to 100% of the tax owed, plus the original tax bill.
What Counts as a 'Side Hustle'?
HMRC's definition of taxable income is broad. If you're earning money outside of your regular employment, you likely need to declare it. This includes, but is not limited to:
- Selling items on platforms like eBay, Vinted, or Depop (beyond just clearing out old clutter)
- Income from freelance work, consulting, or part-time gigs
- Earnings from rental properties, including short-term lets (e.g., Airbnb)
- Money made from paid online content creation, such as a monetised blog or social media channel
- Providing a service like tutoring, dog walking, or craft sales
The £1,000 Trading Allowance: A Critical Threshold
Many are unaware of the 'trading allowance.' You only need to declare your side income and pay tax on it if your total earnings from these ventures exceed £1,000 in a single tax year (6th April to 5th April the following year).
If your earnings are under this amount: You're not required to do anything, but you must keep records in case HMRC has questions.
If your earnings are over £1,000: You must register for self-assessment and declare the income. You can choose to deduct the £1,000 allowance from your earnings and pay tax on the remainder, or deduct your actual allowable expenses instead—whichever is more beneficial.
How to Get Right With HMRC
If you have undisclosed income, the best course of action is to make a voluntary disclosure to HMRC before they come to you. This can significantly reduce potential penalties.
- Register for Self-Assessment: If you've never filed a tax return, you need to register on the GOV.UK website.
- Gather Your Records: Compile all evidence of your income and any allowable expenses.
- File Your Return: The deadline for the 2023/24 tax year is 31st January 2025. However, you should register immediately if you know you need to.
An HMRC spokesperson stated: "We want to help people get their tax right first time. Our online guidance and tools are available to help anyone understand what they need to declare. It is always better to come to us before we come to you."
Ignoring this warning is a risky gamble. With advanced digital tracking, HMRC's ability to uncover hidden income is more powerful than ever, making compliance not just a legal obligation, but the only sensible financial choice.
