Side hustles come in all different forms, whether it’s selling unwanted clothes on Vinted, baking homemade treats or selling goods through an honesty box.
Tax rules surrounding side hustles have often been confusing, but the Autumn Budget has introduced changes that could make things easier for many people, allowing them to keep more of their earnings.
Although the changes are not in place just yet, from 6 April 2027, side hustlers will be able to earn up to £3,000 tax-free through the extended Trading Allowance. This will provide additional tax relief for individuals earning money through side hustles.
The Self Assessment reporting threshold for side hustlers will also increase to £3,000. This means that many people will no longer need to calculate and report their income to HMRC if their side hustle earnings fall below this amount.
The aim of this change is to reduce the paperwork and administrative responsibilities associated with running a side hustle, helping individuals keep more of the money they earn.
For now, the existing Trading Allowance remains at £1,000 and will continue to apply until 6 April 2027.
Many of the most common side hustles are activities we see every day. These include dog walking, tutoring, content creation and freelance work.
It’s important to remember that the allowance is only available for small self-employed businesses and side hustles that qualify.
According to the Government, up to 1.4 million people could benefit from the increased Trading Allowance, either through paying less tax or having fewer administrative requirements to deal with.
One common misconception is that the Trading Allowance applies separately to each side hustle. However, this isn’t how it works.
The Trading Allowance is calculated using gross income rather than the profit left after expenses have been deducted.
It also applies to your combined qualifying trading income. This means that if you have more than one side hustle, the gross income from each must be added together.
It’s also worth noting that individuals must decide whether to claim the Trading Allowance or deduct their actual business expenses. Generally, you cannot claim both against the same income.
Keeping up with changes to side hustle tax rules can be challenging, particularly if you’ve never registered for or completed a Self Assessment tax return before.
Our team of accountants can help you understand your tax responsibilities, explain the upcoming changes and make sure you’re in the best position to benefit from the new rules when they come into effect.
If you need advice or support with tax on your side hustle, get in touch with our team today.
