In February 2025, HMRC launched its “Help for Hustlers” campaign to provide guidance and advice to entrepreneurs and remind them of their tax obligations if they earn more than £1,000 per year from their ‘side hustle.’
Individuals receiving additional income from side hustles are being urged to report to HMRC if they bring in more than the annual Trading Allowance, which allows individuals to earn up to £1,000 additional tax free income each tax year. This includes those providing services or selling goods to supplement their income such as small businesses, second-hand sellers, freelancers, delivery drivers, taxi drivers and property owners.
Research from Sage in 2024, suggests 47% of people in the UK have a side hustle, with an additional 10% actively seeking one. It has also been reported that one in six people with a side hustle earn more than £1,000 a month in addition to their main income.
HMRC activity
HMRC’s recent activity coincides with a crackdown on taxpayers who are understood to have not declared their additional income, whereby HMRC is sending ‘One to Many’ nudge letters. This crackdown is part of the revenue’s broader commitment to reducing the tax gap, which includes income from the hidden economy, expected to have accounted for about £2.2 billion in the 2022 to 2023 tax year.
Data sharing rules
HMRC’s compliance campaign aims to prompt online sellers to bring their tax affairs up to date and is based on data received from platforms including Airbnb, Vinted, Etsy, eBay, Deliveroo and Uber, as well as Upwork and Fiverr for freelancing income.
In 2024, the Government implemented the Organisation for Economic Cooperation and Development’s (OECD) Model Reporting Rules for Digital Platforms, as part of a global clampdown on tax evasion. This allows HMRC to investigate the tax affairs of those earning money through such companies that are based abroad. HMRC can also share information with other OECD-participating tax authorities where sellers are tax residents.
Digital platforms were required to collect data, including individuals' personal details and bank details, from January 1, 2024, with the first reports starting in January 2025.
Do I need to register for self-assessment?
Currently, anyone earning more than the £1,000 Trading Allowance from a side hustle – in addition to the income tax allowance of £12,570 - will need to register for self-assessment, as earnings over the threshold are subject to income tax. Individuals with annual income from a side hustle below £1,000 will not be required to report this extra income to HMRC
This week, the Treasury announced plans to increase the threshold for reporting trading income on self-assessment tax returns to £3,000 by the end of the current parliament. However, income tax will still be due on side hustle income that exceeds the £1,000 tax free allowance, and individuals will be able to pay this using a new online service rather than filling out a tax return when these changes come in to force.
Most people with a taxable secondary income register as a sole trader. You must register before 5 October following the tax year in which the income was earned. Late registration can result in fines and anyone who has not declared a taxable income could receive an unexpected tax bill, so it is important to ensure compliance in this area.
Ensure compliance
The implementation of the new data-sharing rules suggests HMRC has significantly more information about side hustle earnings and this increased visibility will likely lead to the identification of more individuals who have not declared their additional income so it is important to bring your tax affairs up to date.
For more advice and support about tax and additional incomes please call 0808 1445575 or email help@armstrongwatson.co.uk
