If you earn over £1,000 from a side hustle in a tax year (6 April to 5 April), you must report it to HMRC by registering for Self Assessment as a sole trader by 5 October following the end of the tax year. Register online to get a Unique Taxpayer Reference (UTR), then file a tax return by 31 January.
It's your responsibility to tell HMRC about money you make on the side, not your main employer's. Income from side hustles isn't included on your payslip.
Most people earning taxable side-hustle income pay tax via Self Assessment, after registering as a “sole trader” (rather than setting up a limited company). If you haven't done this before, you must register before 5 October following the end of the tax year in which you earned taxable side-hustle income.
How much can I earn from a hobby before paying taxes?
What is the tax free trading allowance? HMRC introduced it as a tax free allowance to cover “self-starters” with small, hobby-based businesses. It means that you can earn a total of £1,000 from self-employment in a tax year, before you even need to report it to HMRC or pay tax on the income.
It detects patterns, connections, and inconsistencies across an enormous range of data sources. The data sources that Connect feeds off of include: Information from other Government agencies/departments (DVLA, DWP, Companies House, Land Registry, electoral roll, council tax records, etc).
HMRC red flags are patterns or discrepancies that trigger closer scrutiny, often detected by their data system, Connect, including undeclared income, sudden changes in turnover/profit, unusually high expenses, late tax filings, cash-heavy businesses, lifestyle not matching income, complex financial arrangements, and mismatches between different submitted figures (like Companies House vs. Self Assessment) or third-party data (like bank info)**. Missing or altered records, journal entries, or frequent changes in banks are also major warnings.
What qualifies as a hobby expense for tax purposes?
For tax purposes, a "hobby" is an activity you engage in primarily for a purpose other than to make a profit. The IRS commonly classifies inherently "fun" activities like creating art, photography, crafts, writing, antique or stamp collecting, or training and showing dogs or horses as hobbies.
There is no maximum amount set for hobby income. The IRS just considers it regular income, and it's added on top of whatever other income you have. You cannot take any deductions for it, other than your standard deduction.
The short answer is yes – HMRC has several ways to access information about your online selling activities. PayPal and Depop may be required to share data with tax authorities, especially for sellers who exceed certain transaction thresholds or show patterns consistent with business trading.
The HMRC 4-year rule generally means you have four years from the end of the relevant tax year to claim a refund for overpaid tax or for HMRC to issue a discovery assessment for underpaid tax due to a genuine mistake. This limit extends to six years for "careless" errors and 20 years for "deliberate" actions, with longer periods applicable for offshore matters (12 years) or specific non-domicile regimes. The rule applies across most taxes, but timeframes vary depending on the reason for the error.
The IRS generally treats Amazon Vine product value reported on a 1099 as taxable income. If reviewing is regular and intentional, it may be considered self-employment, allowing deductions for related expenses (e.g., internet, supplies). If it's a hobby, income must be reported, but deductions aren't allowed.
Anyone who earned more than £1,000 from side hustles in the 2024-25 tax year (6 April 2024 to 5 April 2025) will need to register for self-assessment as a sole trader and file a tax return and pay any tax due by 31 January 2026.
If you are only getting a small amount of income occasionally throughout the year from an activity, but aren't making a profit, you likely have a hobby. Keep in mind that you still need to report your income from your hobby on Schedule 1, Form 1040, line 8j.
If you have other undeclared income, HMRC use Connect and other methods to find it and make sure you pay your tax on it. You'll need to pay the back taxes too. And you may be looking at the UK's tax evasion penalty system, which can be quite severe.
The 70% money rule, often part of the 70/20/10 budget rule, is a simple budgeting guideline that suggests allocating your after-tax income into three main categories: 70% for essential living expenses (needs like rent, groceries, bills), 20% for savings and investments, and 10% for debt repayment or financial goals (wants/future goals). It provides a clear framework for controlling spending, building wealth, and managing debt, though percentages can be adjusted for individual financial situations.
