Side hustles come in all shapes and sizes, from selling clothes on Vinted to baking homemade goods and selling them in an honesty box.
Tax rules for side hustles have always been somewhat confusing, but the Autumn Budget has changed the game for many side hustlers, letting them keep more of what they earn.
What has changed about tax on side hustles?
While nothing has changed yet, from 6 April 2027 side hustlers can earn £3,000 tax-free under the extended Trading Allowance, which gives additional tax relief to those earning income from side hustles.
The Self Assessment rule for side hustlers will also rise to £3,000, meaning that most people will no longer have to calculate their income and report it to HMRC if their side hustle falls under the threshold.
This measure is designed to reduce the administrative burden associated with side hustles, allowing individuals to keep more money in their pocket.
The current Trading Allowance stands at £1,000, which will remain the case until 6 April 2027.
Who is set to benefit from the change?
Some of the most common side hustles are ones that we come across daily. This can range from dog walking and tutoring to content creation or freelancing.
It is important to remember that this allowance only applies to small self-employed businesses and side hustles.
According to the Government, up to 1.4 million people could benefit from an increased Trading Allowance, whether that is from a tax reduction or reduced administration.
What do side hustlers still need to know?
One of the most common things we see is that people assume that the allowance is given per side hustle. This is simply not the case.
The Trading Allowance is based on gross income, not the profit after expenses. The allowance is given based on all qualifying trading income combined, meaning if you have multiple side hustles, you will need to add the gross income together.
Additionally, individuals must choose between claiming the Trading Allowance or claiming actual expenses. Both typically cannot be claimed against the same income.
How can we help?
Understanding changing rules around side hustles can be tricky, especially for those who have never registered for or completed a Self Assessment tax return before.
Our team of accountants can help you to understand the rules and can help you to ensure that you can make the most of the rules when they arrive.
For support with tax on side hustles, get in touch with our team.
