If you’ve spent more than five minutes on social media lately, you’ve probably seen posts about the so-called “side hustle tax”. Whether you’re selling on Vinted, doing a bit of freelance work, or making cakes for friends – it seems like everyone’s suddenly talking about tax.

Let’s break it down properly.

What is the £1,000 Trading Allowance?

The £1,000 trading allowance is a tax-free allowance for people who earn a bit of extra money outside of their regular job – through things like:

• Selling on eBay, Etsy, Vinted or Depop
• Doing a bit of freelance or consultancy work
• Baking, babysitting, pet-sitting, lawn-mowing – you name it!
• Any small “side hustle” where you’re earning money from providing goods or services

If your total income from this kind of work is less than £1,000 in a tax year, you don’t need to tell HMRC about it or pay any tax.

What If You Earn More Than £1,000?

If your total income from side hustle-type activities goes over £1,000 in a tax year, then yes – you may need to:

1. Register for Self Assessment
2. Submit a tax return
3. Pay tax on your profits (but don’t worry, it’s only on what you actually make after expenses)

The first £1,000 is still tax-free though if you claim the trading allowance on your tax return. Depending on the level of income and expenses it may be better to claim actual costs rather than the trading allowance. If we do your tax return for you then we will let you know which way will be best for your specific circumstances.

Here’s an Example!

Let’s say you made £1,500 selling stickers on Etsy.

You don’t have many costs, so you choose to claim the £1,000 trading allowance.

You’ll only pay tax on the remaining £500 profit.

(Remember if you do have expenses over £1,000, you can choose to deduct those instead of the allowance – whichever gives you the better result.)

So… Is the “Side Hustle Tax” New?

Nope – this has been around since 2017! What’s changed is that HMRC is getting smarter at spotting undeclared income, especially from digital platforms like Vinted, Airbnb, and PayPal.

There’s more data-sharing between platforms and tax authorities now – so if you do earn over £1,000, it’s more important than ever to declare it properly. HMRC is watching but it’s not an issue if you’re playing by the rules.

We love seeing people turn hobbies into income but it’s just as important to understand the tax bits before it gets confusing.

If your side hustle is starting to take off and you’re unsure where the line is between “just a bit of extra cash” and “I need to do a tax return”, let’s have a chat.

We can help you stay on the right side of HMRC – and make sure you’re not paying more tax than you need to.

Book a free discovery call with us here.