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Welcome back to our Mythbusters blog series, where we bust financial myths that could land business owners, freelancers, and side hustlers in hot water. At Black & White Accounting, we know the gig economy is booming, with more people than ever juggling side hustles alongside their main jobs. But do you really need to tell HMRC about that extra income?
Today, we’re tackling a dangerous misconception: “Side hustles don’t need to be declared.” If you’re earning extra cash through freelancing, e-commerce, or gig work, assuming HMRC won’t notice could lead to costly penalties and tax trouble. Here’s what you need to know.
The Myth: “HMRC Doesn’t Care About My Side Hustle”
Many people believe that small-scale side hustles fly under HMRC’s radar, especially if earnings aren’t huge or it’s “just a bit of extra cash.” After all, if it’s not a full-time job, why would it matter?
The Reality: Most Side Hustles Are Taxable
No matter how informal your side gig is, income is still income—and HMRC expects you to report it. Whether you’re selling handmade crafts on Etsy, running a dropshipping business, doing freelance design work, or driving for Uber, if you’re making money, you may owe tax on it.
When Do You Need to Declare Side Hustle Income?
- If you earn over £1,000 per year from your side hustle, you must declare it to HMRC.
- The £1,000 Trading Allowance allows you to earn up to this amount tax-free, but anything above this must be reported through Self-Assessment.
- If you’re also employed, your employer does not report your side hustle income—you must do this yourself.
What Counts as a Side Hustle?
Any extra income outside of your main job could count as a taxable side hustle, including: ✅ Freelancing (writing, graphic design, consulting, etc.) ✅ Selling goods online (Etsy, eBay, Depop, Shopify) ✅ Driving for ride-share services (Uber, Bolt, etc.) ✅ Delivering food or goods (Deliveroo, Amazon Flex) ✅ Renting out property or rooms (Airbnb, holiday lets) ✅ Offering paid skills or services (coaching, tutoring, photography, etc.)
What Happens If You Don’t Declare Side Income?
Ignoring this myth can lead to serious consequences: ❌ Tax Penalties – HMRC can charge penalties, interest, and backdated tax for undeclared income. ❌ Investigations – If HMRC discovers undeclared income, they can launch an investigation into your finances. ❌ Fines & Legal Action – In severe cases, persistent tax evasion could lead to legal action.
How to Stay Tax-Compliant With Your Side Hustle
The good news? Paying tax on your side hustle doesn’t have to be stressful! Here’s how to stay compliant while keeping your tax bill as low as possible:
1. Register for Self-Assessment
If you earn over £1,000 from self-employment, you need to register with HMRC and file a Self-Assessment tax return each year.
2. Keep Track of Income & Expenses
Use digital tools or apps to track all your earnings and expenses—this will make tax time much easier!
3. Claim Allowable Expenses
You can offset business costs against your side hustle income, reducing your tax bill. Examples include:
- Website hosting and domain fees
- Equipment and software
- Travel costs (for work-related journeys)
- Home office expenses
4. Plan for Tax Payments
Unlike PAYE employees, tax won’t automatically be deducted from your side hustle earnings. Set aside money for tax so you’re not caught off guard.
5. Get Expert Accounting Advice
Working with an accountant helps you stay compliant, maximize tax savings, and avoid costly mistakes. We can help you structure your side hustle tax-efficiently and ensure you’re not overpaying.
Don’t Let This Myth Cost You – Stay Compliant with Black & White Accounting
The gig economy offers incredible opportunities—but don’t let tax mistakes ruin your success. If you’re earning money from a side hustle, it’s time to get tax-savvy.
At Black & White Accounting, we help freelancers, side hustlers, and small business owners navigate the tax system with ease.
Not sure if you need to declare your side income? Get in touch with our expert team today and let’s make sure you’re tax-ready!
Stay tuned for more Mythbusters blogs, where we continue to bust financial myths and help businesses thrive with confidence.
