Guide Self Assessment for Side Hustles in the UK

/Published:14th January 2026/inContractors, Expenses, Freelancers, Making Tax Digital, Self Employed
Accounting Wise - guide to Self Assessment for side hustles in the UK

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Side hustles are brilliant right up until tax time turns into a guessing game. One minute you are earning extra cash, the next you are wondering whether HMRC expects a tax return, what counts as taxable income, and whether that PayPal balance actually matters.

This guide to Self Assessment for side hustles in the UK breaks it all down in plain English. You will learn when you must register for Self Assessment, what income needs declaring, which expenses you can legitimately claim, and what records HMRC expects you to keep.

More importantly, we highlight the common mistakes that catch side hustlers out, including missing registration deadlines, underestimating tax due, and assuming “small” income does not count. These are exactly the issues that lead to unexpected tax bills, late filing penalties, and unnecessary stress.

Whether your side hustle is freelancing, selling online, content creation, tutoring, consulting, or earning through apps and platforms, this guide will help you stay compliant, tax-efficient, and confident about your responsibilities.

Throughout the guide, you will also find practical tips, official HMRC resources, and real-world examples to help you understand what applies to your situation, not just the theory.

If you are earning money outside your main job, this is the complete, no-nonsense guide to getting Self Assessment right the first time.

What counts as a “side hustle” for tax purposes?

HMRC does not care whether you call it a hobby, a weekend gig, or a side hustle. What matters is one thing only: are you earning taxable income?

If money is coming in regularly, or with the intention of making a profit, HMRC will usually treat it as taxable income, even if it is not your main job and even if it feels informal.

Common types of side-hustle income include:

  • Freelancing or contracting such as design, writing, consulting, trades, or digital services
  • Selling products online including handmade items, reselling, dropshipping, or print-on-demand
  • Social media and content income from ads, sponsorships, gifted collaborations, or affiliate links
  • Coaching, tutoring, teaching classes, personal training, or fitness sessions
  • Driving or delivery work through apps and platforms
  • Casual jobs and odd bits paid by cash, bank transfer, PayPal, or platforms

If you are earning money outside of PAYE from your main employment, you may need to register for and submit a Self Assessment tax return. This applies even if your employer already deducts tax from your salary.

HMRC sets out who must file a tax return on its official guidance page: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

Important: income paid in cash, through apps, or via online platforms is still taxable. There is no such thing as “invisible” income once it hits your bank account or payment provider.

If you are unsure whether what you are doing counts as a side hustle for tax purposes, the safest approach is to assume it does and get clarity early. Registering on time and declaring correctly is always cheaper and easier than fixing mistakes later.

The £1,000 rule: trading allowance explained

If your total gross income from trading activities is £1,000 or less in a tax year, it may be covered by the trading allowance. In many cases, this means you do not need to register for Self Assessment or declare the income at all.

Gross income means your total turnover before expenses, not what is left after costs. This is one of the most common areas where side hustlers get caught out.

HMRC explains the trading allowance in full here: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

Here are the key points people often miss:

You cannot partially use the allowance. You either:

  • Use the £1,000 trading allowance and ignore expenses, or
  • Claim actual business expenses instead and pay tax on the remaining profit

In practice, if your expenses are higher than £1,000, it is often better to skip the allowance and claim costs properly. This decision can make a meaningful difference to your tax bill.

HMRC also runs a dedicated Tax Help for Hustles resource aimed specifically at people earning side income through platforms, apps, and online marketplaces. It is well worth reviewing if your income comes from digital or gig economy work.

If you are close to the £1,000 threshold or expect your side hustle to grow, it is sensible to track income carefully from day one. Going even £1 over can change your reporting obligations.

Do you need to do a Self Assessment tax return?

You will generally need to submit a Self Assessment tax return if you are self-employed or running a side hustle and have income that needs declaring. This applies even if you are also employed and already pay tax through PAYE.

HMRC’s official guidance on who must file a return is the best place to start:  https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

If you want a quick yes or no answer, HMRC also provides an online checker that asks a few questions about your income and circumstances and tells you whether a return is required for a specific tax year: https://www.gov.uk/check-if-you-need-tax-return

A practical rule of thumb for side hustles

Be aware that the £1,000 rule is not the only trigger for Self Assessment. You may also need to file a return if you have other untaxed income, capital gains, or specific tax situations alongside your side hustle.

If you are unsure, the safest option is to use the HMRC checker and keep full records of your income and expenses either way. Registering and filing when required avoids late penalties and interest, even if the final tax bill turns out to be small or nil.

Stress-Free Self Assessment Tax Returns

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Key deadlines you can’t afford to miss (and what they mean)

Self Assessment follows a predictable annual cycle, but missing even one key date can trigger automatic penalties and interest. Understanding what each deadline actually means helps you plan and avoid last-minute panic.

Filing deadlines

  • Online tax return deadline: 31 January following the end of the tax year.For the 2024/25 tax year, the deadline is 31 January 2026. HMRC Self Assessment deadlines
  • If you want to pay tax through your PAYE tax code (where eligible), there is usually an earlier cut-off, often 30 December. HMRC guidance on payment options

Payment deadlines

  • Balancing payment: the remaining tax you owe for the tax year is normally due by 31 January.
  • Payments on account: advance payments towards the following tax year, if triggered, are usually due on 31 January and 31 July. How to pay your Self Assessment tax bill

Payments on account often catch side hustlers by surprise. They usually apply if your last tax bill was over £1,000 and less than 80 percent of your tax was collected at source. This can mean paying more than expected in your second year of trading.

If you file your tax return late, HMRC can charge penalties even if you do not owe much tax or owe nothing at all. Penalties start automatically once the deadline is missed and increase the longer the return remains outstanding.

Independent tax charities provide clear, plain-English breakdowns of how Self Assessment penalties work, including daily and long-term charges: https://taxaid.org.uk/tax-information/self-assessment-tax-return/late-tax-returns

The simplest way to avoid penalties is to file early, even if you are not ready to pay. You can submit your return months in advance and settle the tax bill closer to the deadline once you know what you owe.

Step-by-step: how Self Assessment works for a side hustle

Self Assessment can look intimidating at first, but for most side hustles it follows a clear, logical process. Breaking it down step by step makes it far more manageable.

1) Work out your tax year

The UK tax year runs from 6 April to 5 April. All income and expenses must fall within this window to be included in that year’s return. MoneySavingExpert tax year explainer

2) Add up your side-hustle income (turnover)

Total up all income received from your side hustle during the tax year. This includes:

  • Invoices issued and paid
  • Bank transactions
  • Platform and app statements
  • Payment processor reports (such as PayPal or Stripe)
  • Cash payments and transfers

Use the gross figures before expenses. HMRC expects you to be able to evidence where the numbers come from if asked.

3) Decide how you will claim costs

You will usually choose between two methods:

  • Trading allowance: a flat £1,000 allowance instead of claiming expenses, or
  • Actual allowable expenses: claiming what you genuinely spent for business purposes

You generally cannot combine both for the same income. It is typically the allowance or expenses, not both.

4) Calculate your profit

Profit = income minus allowable expenses

Tax is normally charged on your profit, not your turnover, unless you choose to use the trading allowance instead of claiming costs.

5) File your return and pay what you owe

You can submit your Self Assessment tax return from 6 April after the tax year ends, and you do not need to wait until January.

HMRC’s deadlines page explains when you can file and when payment is due:  https://www.gov.uk/self-assessment-tax-returns/deadlines

Filing early gives you clarity on your tax bill and more time to budget for payment. Even if you cannot pay immediately, submitting on time helps you avoid late filing penalties.

Allowable expenses: what you can usually claim (and what you can’t)

Claiming allowable expenses correctly can significantly reduce your tax bill. Getting it wrong, however, is one of the fastest ways to trigger questions from HMRC. The key principle is that costs must be wholly and exclusively for business purposes, or fairly apportioned where there is mixed use.

Common allowable expenses (typical examples)

  • Stock, materials, or goods purchased for products you sell
  • Software subscriptions and digital tools used for your side hustle
  • Marketing and advertising costs, including online ads and website fees
  • Business insurance relevant to your activity
  • Accountancy and bookkeeping fees
  • Platform fees and payment processing charges
  • Phone costs relating to business use only
  • Travel costs for genuine business journeys, excluding normal commuting

HMRC provides detailed guidance on allowable business expenses for self-employed individuals: https://www.gov.uk/expenses-if-youre-self-employed

Working from home: simplified expenses option

If you work from home for your side hustle, HMRC allows you to use simplified expenses based on the number of hours worked each month. This avoids complex calculations for heating, electricity, and other household costs.

The official rates and eligibility rules are set out here: https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Mixed-use costs: the golden rule

If an expense is partly personal and partly business, such as a mobile phone, broadband, or laptop, you should usually claim only the business-use proportion. HMRC expects this split to be reasonable and justifiable.

Keep a simple record showing how you calculated the percentage used for business. This could be based on time, usage, or another sensible method. Clear notes are often just as important as the receipt itself.

What you generally cannot claim

  • Everyday personal expenses with no clear business link
  • Normal commuting costs between home and a regular workplace
  • Clothing worn day to day, even if you work while wearing it
  • Expenses with no supporting evidence or explanation

When in doubt, ask whether you would still incur the cost if the side hustle did not exist. If the answer is yes, it is unlikely to be fully allowable.

Records to keep (so you’re covered if HMRC asks)

Even if your side hustle is relatively small, it is important to build a basic and consistent audit trail. Good records make filing quicker, reduce stress, and give you confidence if HMRC ever asks how you arrived at your figures.

At a minimum, you should keep:

  • Sales invoices and platform income statements
  • Bank statements or transaction exports covering your side hustle
  • Receipts and invoices for business expenses
  • A mileage log for business travel, if relevant
  • Records of home-working hours if using simplified expenses
  • A simple income and expense spreadsheet or bookkeeping summary

HMRC generally requires self-employed records to be kept for at least five years after the 31 January submission deadline for the relevant tax year. Digital copies are acceptable as long as they are clear and accessible.

You can find HMRC’s full record-keeping guidance here: https://www.gov.uk/self-employed-records

Keeping records as you go makes Self Assessment faster, helps you claim expenses confidently, and reduces the risk of errors if you are ever reviewed.

Side hustle plus a full-time job: how tax is actually worked out

If you have a PAYE job alongside your side hustle, your employment income will usually use up your personal allowance and tax bands through payroll. Your side-hustle profit is then added on top via Self Assessment.

This can:

  • Push some of your income into a higher tax band, and
  • Create a tax bill due in January, sometimes including payments on account

This is why even a modest side hustle can result in a larger-than-expected January bill if you have not been setting money aside throughout the year.

A simple habit that helps is to put aside a percentage of each side-hustle payment into a separate savings account. This keeps the tax money ring-fenced and avoids unpleasant surprises when the deadline arrives.

Red flags and common mistakes (that cost people money)

Most Self Assessment problems are not caused by complex tax rules. They usually come from simple assumptions or missed details that quietly snowball into penalties, interest, or higher tax bills than expected.

Here are the most common red flags HMRC sees with side hustles:

  • Assuming “it’s just extra income” so it does not count for tax purposes. If money is coming in, HMRC usually expects it to be considered.
  • Forgetting that the £1,000 trading allowance is based on gross income, not profit. Going over the threshold by even a small amount can change your obligations. Low Incomes Tax Reform Group guidance
  • Missing the 31 January filing or payment deadlines, which triggers automatic penalties and interest. HMRC deadline guidance
  • Claiming personal expenses as business costs, especially where there is no clear business link or apportionment.
  • Not budgeting for payments on account, leading to a much larger bill in your second year of reporting. How payments on account work
  • Falling for fake “HMRC refund” emails, texts, or calls. Scams spike around Self Assessment deadlines and often look convincing. MoneyWeek scam warnings

If something feels rushed, unexpected, or too good to be true, slow down and check it. HMRC will never ask for personal or banking details via text or email.

Most mistakes are avoidable with early planning, good records, and a clear understanding of the rules. Fixing errors after the deadline is almost always more expensive than getting it right from the start.

Useful official and independent resources (worth bookmarking)

Self Assessment rules are detailed, and guidance can change over time. These official and independent resources are reliable, up to date, and written to help real people understand their obligations without unnecessary jargon.

Bookmarking these pages gives you quick access to authoritative answers and helps you sense-check advice from forums, social media, or well-meaning friends.

If your side hustle starts to grow or your situation becomes more complex, professional advice can often pay for itself by helping you stay compliant while avoiding unnecessary tax.

Quick checklist: what to do this week if your side hustle is growing

If your side hustle is starting to pick up, a few simple actions now can save hours of stress and unexpected costs later. This checklist focuses on practical steps you can take immediately.

  • Track every payment in and out. A basic spreadsheet is more than enough to start with.
  • Check whether your gross income is approaching or over the £1,000 trading allowance for the current tax year.  LITRG trading allowance guidance
  • Ringfence a percentage of your side-hustle profit for tax by moving it into a separate savings pot.
  • Keep receipts, invoices, and platform statements in one dedicated digital folder.
  • Note your home-working hours if you plan to claim simplified expenses .HMRC working from home guidance
  • Add key dates to your diary, especially 31 January and, if relevant, 31 July.
    Self Assessment payment dates

These small habits quickly create clarity around your numbers and make Self Assessment far easier when the deadline arrives.

Final thoughts: keep the side hustle profitable, not stressful

A side hustle should give you flexibility, extra income, and momentum, not sleepless nights when January rolls around. The tax rules are not there to catch you out, but they do expect you to stay organised, honest, and on top of the basics.

If you remember one thing, make it this: track your income early, understand the £1,000 threshold, and do not ignore Self Assessment just because the money feels secondary to your main job. Most problems arise from delay, not complexity.

With good records, realistic budgeting for tax, and a clear understanding of your obligations, Self Assessment becomes a routine admin task rather than a yearly panic.

If your side hustle is growing, your income is becoming more varied, or you simply want peace of mind, getting advice sooner rather than later can save both money and time. At Accounting Wise, we help side hustlers across the UK stay compliant, tax-efficient, and focused on growing what matters.

Do it right early, and your side hustle can stay exactly what it should be: a smart opportunity, not a tax headache.

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Freelancer Time Tracking and Productivity FAQ

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Time tracking helps freelancers understand where their hours go, improve pricing accuracy, manage scope creep, and ensure their effective hourly rate matches their goals. It also provides solid records for invoicing and HMRC compliance.

Begin with a simple timer app like Toggl or Clockify. Create categories for billable and non-billable work, start a timer before each task, and review your weekly reports.

Yes. Even with value-based pricing, time tracking protects your margins and helps you see whether a project is profitable compared to your target hourly rate.

Most solo freelancers sustainably bill 25–30 hours per week. The rest goes on admin, marketing, and learning. A healthy utilisation rate is typically 60–80%.

Billable hours are time spent on client deliverables you can invoice for (e.g., design, coding, writing). Non-billable hours cover tasks like admin, marketing, or unpaid client communication.

Use historical data. Compare estimates to actuals, then adjust future quotes with a buffer. Techniques like PERT estimation add contingency for unknowns.

Popular choices include Toggl Track, Clockify, and Harvest. For UK accounting and HMRC compliance, Xero, FreeAgent, or The Balance App work well with timesheet integrations.

Transparent logs back up invoices, reduce disputes, and make conversations about scope creep more objective. They also help set clearer expectations for delivery times.

It depends on your workflow. Manual timers give control and context, while automatic trackers like RescueTime or ManicTime run in the background and capture everything. Many freelancers use a mix.

A quick daily check keeps records accurate. A weekly review helps you refine estimates, track utilisation, and spot overruns. Monthly reviews let you analyse client profitability and adjust pricing.

Yes. Time logs create tidy audit trails, strengthen record-keeping, and link directly to invoices. They can also help justify expense allocations and support HMRC compliance, including Making Tax Digital.

Glossary of Key Productivity Terms

Billable Hours – Time spent directly on client work that you can charge for (e.g. design, coding, writing).

Non-Billable Hours – Work you can’t invoice for, such as admin, marketing, training, or unpaid client communication.

Utilisation Rate – The percentage of your total working hours that are billable. For example, if you work 40 hours in a week and 28 are billable, your utilisation rate is 70%.

Realisation Rate – The percentage of recorded billable hours you actually invoice. If you worked 30 billable hours but only billed for 27, your realisation rate is 90%.

Effective Hourly Rate (EHR) – Your actual hourly earnings once all time (billable + non-billable) is considered. Formula: total revenue ÷ total hours worked.

PERT Estimation – A project estimation technique using three values: Optimistic (O), Most Likely (M), and Pessimistic (P). The formula is (O + 4M + P) ÷ 6 to give a balanced estimate.

Scope Creep – When a project gradually expands beyond the agreed work without additional payment or time allocation.

Cycle Time – The total time it takes you to complete a task or project once you start working on it.

Lead Time – The time from when a client requests work to when you deliver it.

Change Request – A formal client request to alter the scope of a project, usually requiring extra hours or fees.

Pomodoro Technique – A productivity method where you work for 25 minutes, then take a 5-minute break. After four cycles, you take a longer break.

WIP (Work in Progress) Limit – A cap on the number of tasks you allow yourself to work on at once, to avoid spreading your attention too thin.

SOW (Statement of Work) – A document or agreement outlining exactly what’s included (and excluded) in a project to protect against scope creep.

MTD (Making Tax Digital) – An HMRC initiative requiring businesses to keep digital tax records and submit VAT returns using compatible software.

HMRC – Her Majesty’s Revenue and Customs, the UK government body responsible for collecting taxes.

CFO Hour – A freelancer’s self-review session (usually monthly) where you analyse financial data, profitability, and pricing acting like your own “Chief Financial Officer.”
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