With websites like eBay, Vinted, and Airbnb now reporting earnings directly to HMRC, many people are wondering if their side hustle means they need to start filling out a self-assessment tax return. The answer? It depends on how much you’re making and whether you cross the tax-free threshold.
A side hustle can be anything; selling clothes online, renting out a spare room, or even running a small online business. But if you’re earning money from it, HMRC sees it as income, and that means you might owe tax.
So, when do you need to worry?
Let’s talk about it.
HMRC treats a side hustle differently from regular employment, mainly based on how much you earn. If your earnings are below a certain threshold, you don’t have to pay tax, but if you go over, you’ll need to report it.
Why is the £1,200 Trading Allowance important?
Everyone in the UK has a personal tax-free allowance (currently £12,570), which applies to regular income. However, side hustle earnings get a separate trading allowance—£1,200 per tax year. If your side income is under this, you don’t need to report it or pay tax. Go over, though, and things change.
Since January 2024, HMRC has made platforms like Airbnb, eBay, and Vinted report what their users earn, so even if you don’t declare your income, they might already know about it.
Let’s look at some common side hustles and what they mean for your taxes:
Common Side Hustles and What they mean for Your Taxes:
1. Selling Second-Hand Clothes or Items Online
Selling a few old bits and pieces on Vinted or at a car boot sale? Chances are you won’t need to pay tax. If you’re just offloading your own stuff and not making a regular profit, you’re fine.
- Tax-free allowance: £1,200 (or £12,570 if this is your only source of income)
- Tax payable on: Anything over £1,200, if your total income goes above the personal allowance
2. Running an Online Business
If you regularly buy stock to sell for a profit, HMRC considers you a sole trader. That means you’ll need to register as self-employed if your revenue exceeds £1,200.
The deadline for registering? 5 October after the end of the tax year you started trading. So, if you start selling in the 2024-25 tax year (April 6, 2024 – April 5, 2025), you must register by 5 October 2025.
When filing a self-assessment tax return, you can either:
- Claim the £1,200 tax-free allowance
- Deduct your business expenses instead (if they’re more than £1,200, this may be the better option)
If your side business is turning a profit, expect to pay 20% tax on anything over the threshold.
Tax-free allowance: £1,200 (or expenses if they’re higher)
Tax payable on: Earnings over £1,200 (if using the allowance) or profits after expenses
3. Renting Out Your Driveway
Got an empty driveway or parking space? You can rent it out, but HMRC will want a cut if you make more than £1,200 a year from it.
You can also claim tax relief on allowable expenses, such as legal fees, insurance, or admin costs—so keep your receipts!
Tax-free allowance: £1,200
Tax payable on: Income over £1,200, minus any allowable expenses
4. Renting Out a Spare Room
If you rent out a furnished room in your home (including on Airbnb), you can earn up to £7,500 tax-free under the Rent a Room scheme.
If you share the income (e.g., with a partner), this drops to £3,750 each.
You don’t need to report this income if you’re under the threshold. If you go over, you’ll need to complete a self-assessment tax return.
Tax-free allowance: £7,500 (or £3,750 if shared)
Tax payable on: Anything above this, based on your tax band
5. Taking on a Second Job
If you get a second job, like weekend shifts at a café, your employer will tax you through PAYE. You don’t need to worry about self-assessment, but your tax code might change.
Tax-free allowance: None (as your personal allowance is likely used up by your main job)
Tax payable on: All earnings, based on your total income
Our Final Advice on Taxes
HMRC calculates your tax bill based on total income across all jobs and side hustles. If your extra earnings push you into a higher tax bracket, you’ll pay more tax.
If you’re not sure what you owe, HMRC has a second job tax calculator to help you work it out. And remember—if you don’t declare taxable income, HMRC might already have the data from platforms like eBay and Airbnb.
Outsourcing your tax return ensures you’re paying the correct amount of tax while also helping you claim any allowable expenses you might overlook. Mistakes on your tax return can lead to fines or unexpected tax bills, so having a professional handle it can give you peace of mind. Plus, if HMRC ever has questions, an accountant can deal with them on your behalf, keeping you compliant and stress-free.
So, if you’re making more than £1,200 from your side hustle, it’s best to play it safe and file your tax return before 31 January each year to avoid penalties.
Got questions? Let us know how we can help?
