Conventional approaches to work and earning an income are changing and with the cost of living rising, many of us now use various ways to make some extra cash outside of their main job.
Do you need to pay tax on these earnings?
Our guidance below looks at five different types of hustle and what you need to know, from a tax perspective.
- If you sell things you make (including digital creative products), upcycle furniture to sell or buy items to resell at a higher price, HMRC might consider you to be trading.
- In your spare time, do you have regular side gigs providing car repair services, undertaking deliveries, dog walking, gardening or tutoring which you’ve done for a while, HMRC will probably treat you as trading.
- If you earn a living from doing several different jobs, you could be trading and might need to register with HMRC as a sole trader
- If you have turned a hobby into something that earns regular income such as creating social posts for a brand, receiving advertising income from online videos or blogs, creating content or are an influencer – HMRC will consider you to be trading.
If you earn £1,000 or less in a tax year (before costs), you won’t pay any tax on it. However, if you earn more than £1,000 (before costs), you do need to tell HMRC and pay tax on what you make. Bear in mind that the £1,000 limit is a single allowance that applies to your combined trading income, not each source. It has been announced that the reporting threshold might be increased to £3,000 but if your side hustle income before costs exceeds £1,000 you will still need to pay income tax on the excess.
Online platforms such as Vinted, eBay provide information to HMRC but that doesn’t necessarily mean you are liable for tax. You are able to casually sell unwanted personal belongings from time to time without giving rise to a tax bill.
For more information, see https://taxhelpforhustles.campaign.gov.uk
I rent out property – what do I need to tell HMRC?
If you rent out a spare room in your home, your rental receipts may be covered by the £7,500 rent a room allowance.
However, if you receive income of more than £1,000 (before costs) from land or property you don’t live in, you will probably need to pay tax on it.
If you need help working out whether you need to pay tax on your side hustle and/or income you receive from land/property, call one of our tax advisers on 01223 810100.
