In the UK, side hustle income is taxable, but the £1,000 trading allowance means you may not need to tell HMRC if your total gross trading income is £1,000 or less in a tax year. Above that, you will usually need to register for Self Assessment, so keep a simple record of every sale and expense from 6 April to 5 April.
Key Takeaways
- The UK tax year runs from 6 April to 5 April.
- The £1,000 trading allowance applies to gross income, not profit.
- Above the allowance you will usually need to register for Self Assessment.
- Record every sale and expense as it happens in an income and expense tracker.
- Set aside a share of your profit for tax so the bill is no surprise.
Whether you sell handmade items online, take on freelance work in the evenings, run a small market stall or offer a service at weekends, a side hustle can be a rewarding way to earn extra money. It also comes with responsibilities, and one of the most important is keeping clear records. Good bookkeeping does not need to be complicated. With a simple routine, you can stay organised all year and feel far more confident when it comes to tax.
Please note that this article is general guidance, not tax advice. Rules can change, so always check the latest information on GOV.UK or speak to an accountant about your own situation.
Do You Need to Tell HMRC?
In the UK, the trading allowance means that if your total gross income from self employment in a tax year is £1,000 or less, you may not need to report it. If your gross trading income is more than £1,000, you will usually need to register for Self Assessment and file a tax return. Note that this is based on your income before expenses, not your profit.
There are other situations where you may need to register too, so it is worth checking HMRC's guidance on GOV.UK if you are unsure. The key point is that keeping records from day one makes every option easier.
Understand the UK Tax Year
The UK tax year does not follow the calendar year. It runs from 6 April to 5 April the following year. For online Self Assessment returns, the deadline is usually 31 January after the end of the tax year, and that is also usually when any tax you owe must be paid.
Because of this, it makes sense to organise your records by tax year, from April to March, rather than January to December. When the time comes to fill in your return, all the figures you need are already in one place.
Record Every Sale
Every time you earn money from your side hustle, write it down. For each sale or payment, note:
- The date
- A short description, such as the item sold or the client
- The amount received
- The type of income, for example product sales, services or commissions
- Where it came from, such as a marketplace, a bank transfer or cash
If you sell through platforms that take fees, it can be helpful to record the full sale amount as income and the fees as a separate expense. That way your records are clear and easy to check against your statements.
Track Your Business Expenses
Allowable business expenses are costs you incur wholly for your business. Depending on what you do, these might include materials, packaging, postage, platform and payment fees, software, advertising, equipment and some travel costs. Recording them carefully matters, because expenses can reduce your taxable profit.
Keep receipts and invoices, either paper or digital copies, and record each expense with a date, description, amount and category. Grouping costs into categories makes it much easier to see where your money is going and to fill in your tax return.
Expenses or the Trading Allowance
If you have income above £1,000, you can generally choose either to deduct your actual allowable expenses or to use the £1,000 trading allowance instead. If your real costs are high, claiming expenses may work out better. If your costs are low, the allowance may be simpler. Keeping accurate records lets you compare both and choose sensibly.
Know Your Profit Every Month
Income minus expenses gives you your profit. Checking this monthly, rather than once a year, gives you a real sense of how your side hustle is doing. Are some months much busier than others? Which costs are growing? Is a particular product or service more profitable than the rest? These are the insights that help a side hustle grow.
Set Money Aside for Tax
One of the most common worries for side hustlers is a tax bill they did not plan for. A simple habit is to move a percentage of your profit into a separate savings account every month. The right percentage depends on your other income and circumstances, so if you are unsure, an accountant can help you choose a sensible figure. The important thing is that the money is already there when the bill arrives.
Keep Business and Personal Separate
Using a separate bank account for your side hustle, even a simple free one, makes bookkeeping far easier. You can see business money at a glance, and you will not need to search through personal spending to find a single sale.
A Spreadsheet Built Around the UK Tax Year
If you would like a ready made way to do all of this, the Side Hustle Income & Expense Tracker is a bookkeeping spreadsheet for Excel and Google Sheets that runs on the UK tax year, with twelve monthly tabs from April to March, all in pounds sterling. You log each sale and cost, choose a category from a drop down list, and your totals, net profit and margin calculate automatically.
Each month includes a category breakdown and a chart, and the Yearly P&L tab pulls everything into a clear profit and loss statement with three charts. There is also a simple tax set aside guide based on your own chosen percentage, and you can rename the categories to suit your business. It is a record keeping tool rather than tax advice, but it makes preparing for Self Assessment far less stressful.
Start Today
If you have already started earning, go back through your bank statements and record everything since 6 April. Then set a weekly or monthly reminder to update your records. Fifteen minutes a month now can save you hours of stress in January.
Related Guides
- Quotes, Invoices and Getting Paid: A Guide for UK Freelancers
- Rental Property Record Keeping for UK Landlords
- How to Make a Monthly Budget That Works in the UK
Frequently Asked Questions
Do I have to pay tax on my side hustle in the UK?
If your gross trading income is more than £1,000 in a tax year, you will usually need to register for Self Assessment and may owe tax. Check GOV.UK for your situation.
What is the trading allowance?
It is a tax free allowance of up to £1,000 a year for trading income. You can use it instead of deducting your actual expenses, so it suits side hustles with low costs.
When is the Self Assessment deadline?
Online tax returns are normally due by 31 January after the end of the tax year, which is also usually when any tax owed must be paid.
What records should I keep for a side hustle?
Keep a log of sales, expenses, receipts and invoices. HMRC expects you to keep records for at least five years after the 31 January submission deadline.