If you're part of the 43% of the UK population pursuing a side hustle for extra income, you might've noticed some changes in how HMRC is targeting side hustlers and online sellers. Whether you sell on eBay, Airbnb, or Vinted, freelance, or rent out property, HMRC’s new rules are likely to affect you.
This blog will guide you through what the HMRC side hustle crackdown is, why it’s significant, potential penalties for non-compliance, and common questions, giving you actionable steps to stay compliant and protect your income.
What Is HMRC’s Side Hustle Crackdown?
The HMRC side hustle crackdown targets underreported or undeclared income from side hustles and online sales. As of January 2024, platforms like Airbnb, Uber, and Etsy are required to report user earnings directly to HMRC. Through its "One to Many" letter campaign, HMRC is contacting individuals suspected of earning untaxed income, giving them 30 days to declare it.
In the UK, side hustle income up to £1,000 is tax-free thanks to the trading allowance. However, if your earnings exceed this, you must register as self-employed and complete a Self-Assessment tax return. With enhanced data-sharing rules, HMRC now has greater visibility into additional income, making it harder to avoid reporting. Stay compliant to avoid penalties.
Why This Crackdown Matters
The rising cost of living in the UK has pushed many to seek additional income streams, with side hustlers earning an average of £207 per week—or roughly £10,800 annually. Unsurprisingly, HMRC is keen to claim its share.
This crackdown serves two key purposes:
- Encouraging voluntary compliance with tax obligations.
- Targeting deliberate tax evasion.
Failing to meet these obligations can carry serious consequences.
Late payment interest rates currently stand at 7% and are set to rise by another 1.5 percentage points in April 2025.
Penalties range from a £100 fine for late filings to more severe financial penalties for continued non-compliance—or worse, the risk of an in-depth tax investigation.
Staying on top of your tax responsibilities has never been more important.
Is HMRC Cracking Down on Side Hustles?
Yes, and their approach is becoming increasingly sophisticated. New data-sharing rules now grant HMRC direct access to information from digital platforms, significantly reducing opportunities for underreporting. From vintage clothing shops to Airbnb rentals, this expanded crackdown casts a wide net, targeting side hustlers across a range of industries.
HMRC has also bolstered its resources, dedicating £36.69 million and additional staff solely to enforcing these regulations.
If you’ve overlooked your tax obligations in the past, now is the time to address them. HMRC’s message is clear: there’s “nowhere to hide.”
Do You Have to Declare A Side Hustle to HMRC?
Yes, but only if your side hustle earns more than £1,000 a year. This amount is known as your trading allowance, and any income exceeding this threshold must be reported to HMRC. Whether you’re selling items from your garage or working as a rideshare driver, you’ll need to declare the earnings above this limit and pay the appropriate taxes.
When Should You Declare?
- If you earned more than £1,000 of extra income during the tax year. See here for the important dates in 2024/2025 Tax Year.
- If your side hustle profits exceed £2,500 (after deducting expenses) or if your income reaches £50,000 and you're claiming Child Benefit, due to the High Income Child Benefit Charge. Use our calculator to find out how much child benefit tax you`ll owe here
You will need to register with HMRC as self-employed and complete a Self-Assessment tax return before the deadline (31 January).
Is the Taxman Coming for Your Side Hustle?
HMRC may not be actively "coming" for your side hustle, but they are keeping a closer eye than ever before. If your income goes undeclared and HMRC spots discrepancies between your reported earnings and the data provided by the platforms you use, it could lead to an inquiry.
For instance, the Connect system, a powerful data analysis program, allows HMRC to cross-reference information from various sources such as banks, online platforms, and social media. If someone is earning through platforms like Etsy, eBay, or Uber and failing to declare their earnings, HMRC can detect irregularities or undeclared income by matching this data against tax returns.
This approach has resulted in HMRC opening numerous investigations targeting individuals and businesses attempting to evade taxes through unreported side hustle income.
The upside? Staying transparent and compliant is simpler than you might think. By accurately declaring your side hustle income, you avoid penalties and remain in HMRC's good graces.
How Much Can You Earn on a Side Hustle Before Paying Tax?
You can earn up to £1,000 in additional income annually, tax-free, under the trading allowance. However, if your income from your side hustle surpasses this limit—even by just £1—you must declare it.
Additional Deductions to Know:
- Business Expenses: You can deduct allowable business expenses (e.g., materials, tools, hosting fees for your online shop, etc.) before declaring taxable income.
- Personal Tax-Free Allowance: Don’t forget, most individuals also have a personal tax-free income allowance of £12,570, as of 2024/25, which applies to your combined income from all sources (employment + side hustle).
Example:
If your side hustle earned £6,000 but you spent £500 on materials, your taxable income would be £5,500. But if your total income (employment + side hustle) is below £12,570, you likely won’t owe any tax.
Don’t Panic—Debitam Is Here to Help
We know this crackdown may feel overwhelming, but with the right preparation, you can stay compliant and keep maximizing your side hustle income. Time is ticking—don’t leave it until it’s too late! Debitam is here to help you:
- Register as self-employed quickly.
- File your Self-Assessment tax return accurately and on time.
- Understand your taxes while maximizing allowable deductions.
Avoid costly penalties and underreporting mistakes! Talk to us today!
Share this post with other side hustlers—help them avoid financial headaches and stay on top of their taxes. Don’t wait—secure your side hustle’s future today!
