So you’ve got a little side hustle going — selling bits on Vinted, baking cakes for the neighbours, freelancing in the evenings, or maybe walking dogs for cash. Sounds great, right? Extra income, no boss, flexible hours… and surely it’s all tax-free?

Not quite. Here’s the lowdown on when your side hustle is truly tax-free — and when HMRC wants a piece of the pie.

The £1,000 Trading Allowance – Your Free Pass (Sort Of)

The good news is, in the UK, you can earn up to £1,000 a year from self-employment or casual trading without paying any tax. This is called the trading allowance.

Sell a few items online?

Do the odd photography gig?

Make a few quid baking cakes?

If it’s under £1,000 total (before expenses), you don’t need to declare it.

But… if you go over that, even by £1, you’ve got to tell HMRC.

When You Must Register with HMRC

Once your side hustle makes over £1,000 a year, you’re officially considered self-employed for tax purposes. That means:

• Registering for Self Assessment
• Filing a tax return
• Paying any tax and National Insurance due

This applies whether you’re making £1,001 or £100,000. The rules are the same.

Expenses You Can Claim

Here’s where a lot of people get it wrong — you can often deduct costs before paying tax.

Examples:

• Bakers – flour, eggs, cake tins
• Etsy sellers – packaging, postage, craft materials
• Dog walkers – leads, treats, travel costs
• Freelancers – software, subscriptions, internet portion

If you keep good records, your taxable profit can drop dramatically.

Why “Cash in Hand” Isn’t Invisible

The old “cash in hand means no tax” myth? Yeah… HMRC’s heard that one.

With digital payments, bank transfers, and even online marketplace reporting, it’s easier than ever for them to spot undeclared income. And if they catch you? Expect backdated tax bills, interest, and penalties.

Avoiding Penalties

Stay safe by:

• Keeping accurate income & expense records
• Registering with HMRC on time
• Filing your return before the deadline
• Paying what you owe (or setting up a payment plan)

Final Word

Side hustles are brilliant for boosting your income — but only if they don’t end up costing you in penalties and stress. A quick chat with a tax professional can save you money, headaches, and awkward letters from HMRC.