Side hustles: what you need to know about paying tax in the UK

<h2>Work out where you stand</h2>
<p>Since the start of 2024, online platforms such as Vinted, eBay and Airbnb have been <a href="https://www.theguardian.com/money/2024/jan/01/selling-goods-online-be-warned-hmrc-will-soon-know-about-it">required to share data with HM Revenue and Customs (HMRC)</a> for any users who sell more than 30 items a year or earn more than about £1,700 (the threshold is set at €2,000) a year. However, this does not necessarily mean that those users owe any additional income tax.</p>
<p>It’s important to be aware if you might face a tax bill, or have to provide paperwork to show that you do not owe anything.</p>
<p>If you are selling old clothes or other unwanted belongings, these are classed as personal possessions, and you can sell as many of them as you like without having to pay tax on the income. The only exception is if you sell something for more than £6,000: that does have to be declared to <a href="https://www.theguardian.com/politics/hmrc">HMRC</a>, and you may need to pay capital gains tax on any profit.</p>
<p>Other profits from trading, rent payments and freelance work do count towards your income tax calculations. This includes money earned from jobs such as tutoring, dog-walking or babysitting, or renting out any equipment that you own – whether they are things you do casually or regularly.</p>
<p>This is not just about money you earn via online platforms. Profits you make through running a stall at a market are subject to the same rules, but you will need to keep track of the figures yourself.</p>
<h2>Know trading v selling</h2>
<p>“Proving whether you’re selling personal possessions or trading can be straightforward,” says Lee Murphy, the managing director at <a href="https://www.theaccountancy.co.uk/">The Accountancy Partnership</a>. “Be prepared to answer: are you buying items specifically to sell and make a profit? Are you selling regularly and systematically? And are you buying items, doing them up and then selling them?”</p>
<p>These questions point toward what are known as “badges of trade”. If you answer yes to any of them, there is a chance you would be regarded as trading goods.</p>
<p>It also helps to consider how long you have owned something before selling it – did you buy it and sell it quickly for profit? – and whether you took out a loan in order to buy the item you sold.</p>
<h2>Check your allowance</h2>
<p>Everyone in the UK has a £1,000 tax-free trading allowance each year. If your additional work brings in less money than this, then you don’t need to declare it to HMRC.</p>
<p>If you rent out property, you also get a tax-free property allowance of up to £1,000 a year. Lodgers renting a room or rooms in your home are covered under the Rent a Room scheme, which allows people to earn £7,500 each year tax-free.</p>
<p>The Gov.uk <a href="https://www.tax.service.gov.uk/guidance/check-non-paye-income/start/how-did-you-receive-additional-income">website has a questionnaire</a> that can help you to work out whether or not you will need to inform HMRC about your extra income.</p>
<h2>Ready for self-assessment</h2>
<p>If you have earned more than £1,000 from extra work or trading, the money above that forms part of your overall income for the year and will be subject to income tax in the same way as your regular salary. It will be added to your existing income and tax applied according to which band it falls into.</p>
<p>The government has announced that the <a href="https://www.theguardian.com/money/2025/mar/15/side-hustles-uk-tax-return">rules on self-assessment will change in 2029</a>, allowing people to use “a new simple online service” to declare their additional income if it is below £3,000 a year.</p>
<p>But until then you will need to <a href="https://www.gov.uk/register-for-self-assessment">register for self-assessment online</a> to inform HMRC about your extra earnings. The first step is to apply for a unique taxpayer reference (UTR), which can take about two weeks to arrive in the post. Once you have this, you will be able to register online, log in and file your tax return for the relevant year.</p>
<h2>Keep records …</h2>
<p>Research by the online bank Monzo found that people in the UK who do extra work alongside their full-time job are earning an average of £470 a month, or £5,640 a year, from it – far above the £1,000 allowance.</p>
<p>It’s important to maintain thorough records of money you earn from additional work, including expenses that you incur, so you can work out how much tax is payable.</p>
<p>If you do use platforms such as Vinted or eBay and sell things that you still have receipts for, keep them after you have made the sale, so you can provide evidence that these are personal possessions and won’t be subject to income tax. This is especially important for expensive items that might quickly push you over the sales limit. Remember that you may have invoices on email or have taken photos previously for insurance purposes.</p>
<p>Online platforms will store your transaction history, and you can download copies for your own records. If you sell at in-person events such as car boot sales, use a paper receipt book to help you keep track.</p>
<h2>… and remember expenses</h2>
<p>If you encounter costs as part of your additional work, these will be tax-deductible. This can be software you bought to create online content or the tools you use to craft goods and provide services. If you trade online, the platform fees you pay can also be deductible, plus a proportion of energy and wifi bills if you are renting out a property on Airbnb or working from home.</p>
<p>For landlords, expenses can include paying for repairs or insurance. Get into the habit of tracking these costs as reporting them can reduce your tax bill substantially.</p>
<h2>Don’t panic</h2>
<p>Receiving a letter from HMRC can be scary, but it’s important to look it over carefully and respond appropriately. “The letters look intimidating, but in nine out of 10 cases, they’re asking for additional information or clarification, or saying that you’ve missed out one of your many, many receipts,” says Murphy.</p>
<p>“Firstly, check what the letter is actually saying and go from there. Check the tax year involved and any deadlines that they’ve given, and gather relevant records for that tax year.”</p>
<p>This could be sales history, bank statements and platform statements. He adds that you should avoid contacting HMRC until you find the answer to what you are being asked, as long as you don’t miss its deadline. In most cases, HMRC will give you either 30 or 60 days to respond.</p>
<p>“Whatever you do, do not completely ignore the letter so that it goes past the deadline,” he says. “This can land you in serious trouble and can lead to some huge fines.”</p>
<p>If you are contacted because you have sold expensive secondhand items through online platforms, and you don’t have receipts to show the items were personal possessions: again, don’t panic. You can provide a bank statement to show when you made the purchase, or even try to submit photos of you wearing or using the item in question.</p>
<h2>Be proactive</h2>
<p>If you did not anticipate owing additional taxes, you may be in a tricky spot and lack savings to pay the bill in one go. If this is the case, contact HMRC.</p>
<p>“HMRC is a lot more flexible if your communication with it is strong from the start,” says Murphy. “Ensure that if you are in this situation, you contact them before any action begins and you’re open about your financial situation.”</p>
<p>You can come to an arrangement with HMRC known as “Time to Pay” where the money you owe is spread out into more manageable monthly instalments. “While there may be interest on these payments,” says Murphy, “it’ll be far lower than a fine.”</p>