I Don’t Need to Declare My Side Income”—And Other Tax Myths That Could Cost You

We’ve all heard it, or maybe even said it ourselves: “It’s just a few hundred pounds; I don’t need to tell the taxman about my side income.”

It’s one of the most common tax myths out there, and believing it can lead to unexpected bills, penalties, and stress from HMRC.

The truth is, the rules around side income are more nuanced. While there are generous allowances, they don’t apply to every situation automatically. Let’s bust this myth wide open and give you the clarity you need to stay on the right side of the law.

The Golden Rule: The £1,000 Trading Allowance

First, the good news! The government introduced a £1,000 trading allowance to make life easier for people with small side businesses.

• What it is: If your total gross income (that’s before expenses) from your self-employed side hustles is £1,000 or less in a tax year (6th April to 5th April), you don’t need to declare it or pay any tax on it. It’s completely tax-free.
• Example: If you made £800 selling crafts on Etsy or walking dogs, that income is covered by your allowance. You can simply keep the money without any further action.

👉 Check out our guide on What Counts as Self-Employment? to see if your side hustle qualifies.

When You MUST Declare Your Side Income

This is the crucial part many people miss. The £1,000 allowance is a threshold, not a universal rule. You must register for self-assessment and declare your income if:

1. Your Gross Side Income Exceeds £1,000: If you earn more than £1,000 from your side hustles in a tax year, you must report it to HMRC. You can then choose to deduct the £1,000 allowance from your income instead of calculating exact expenses.
   • Example: You made £2,500. You can either deduct the £1,000 allowance and be taxed on £1,500 or deduct your actual business expenses (like materials, postage, etc.), whichever is higher.
2. You Can’t Use the Allowance (Special Cases): The Trading Allowance does not apply if your income is from:
   • A partnership where any partner is a company.
   • Your employer or a company you or your family control. This is to prevent tax avoidance.
3. You Have Other Reasons to File a Tax Return: Even if your side income is under £1,000, you are already required to file a Self Assessment return if:
   • You are a director of a company (unless it’s a non-profit organization).
   • You have income from savings or investments over £10,000.
   • You need to pay the High Income Child Benefit Charge.
   • Your income from renting out property is over £2,500.

💡 Unsure about your status? Our article on Are You an Employee, Self-Employed, or Both? can help you figure it out.

What About Renting Out Property?

There’s a separate but similar allowance for property income.

• The £1,000 Property Income Allowance works the same way. If your gross rental income (e.g., from a spare room on Airbnb) is £1,000 or less, you don’t need to declare it.
• If it’s between £1,000 and £2,500, you need to contact HMRC.
• If it’s over £2,500, you must register for self-assessment.

🔗 Official Source: Read about the Property Allowance on GOV.UK.

The Risks of Not Declaring: It’s Not Worth It

HMRC is getting increasingly sophisticated at spotting undeclared income. They can cross-reference data from online marketplaces like eBay, Etsy, and Airbnb, as well as payment processors like PayPal and bank records.

If you should have declared your income and didn’t, you could face:

• A bill for all the unpaid tax owed.
• Interest on the late payment.
• Financial penalties, which can be up to 100% of the tax due in severe cases.

Your Action Plan: Stay Safe and Compliant

1. Keep Simple Records: Note down your income and any related expenses. A simple spreadsheet is enough.
2. Check Your Total Income: Before the tax year ends on April 5th, add up all your side income.
3. Register for Self Assessment: If you need to, you must register by October 5th following the end of the tax year. For example, for the 2024/25 tax year (ending 5 April 2025), register by 5 October 2025.
   • 🔗 Register here: GOV.UK Self Assessment Registration
4. File and Pay on Time: The deadline for online tax return submission is January 31st.

💼 Feeling overwhelmed? We can help! Explore our self-assessment tax return services to get expert support and peace of mind.

Conclusion: Better Safe Than Sorry

The phrase “I don’t need to declare my side income” is only sometimes true. While the £1,000 Trading Allowance is a fantastic benefit for micro-entrepreneurs, it has important limits.

Understanding these rules empowers you to grow your side hustle confidently and legally. When in doubt, it’s always better to check the official guidance or seek professional advice. Don’t let a common myth turn your side hustle into a financial headache.

Disclaimer: This blog post provides general information and does not constitute financial or tax advice. Tax rules can change, and your individual circumstances are unique. For guidance tailored to your situation, please consult a qualified professional or refer to the official GOV.UK website.