HMRC has issued an urgent warning to anyone with a side hustle to act now or risk being hit with a big fine.
Those earning money from an extra income stream, including online selling, have to submit tax returns through self-assessment.
AlamySide hustlers need to submit their self-assessment tax returns by January 31[/caption]Anyone earning more than £1,000 a year has to submit one – and the deadline to do it online for the 2024/25 tax year is January 31, 2026.
If you’ve not registered for self-assessment before, you must register by October 5.
Fail to do either of these things and you could end up facing a hefty fine from HMRC.
Filing your self-assessment tax return after January 31 and just one day late will see you fined £100.
You also face further fines of £10 a day after three months, up to a maximum of £900.
Of course, the January 31 deadline to file your tax return is months away, but filing early can give a chance to budget for any taxed owed.
You may be able to set up a Budget Payment Plan to help spread the cost of taxed owed too.
This lets you make weekly or monthly direct debit payments to pay off any tax or National Insurance owed.
Myrtle Lloyd, HMRC’s director general for customer services, said: “Whether you are selling handmade crafts online, creating digital content, or renting out property, understanding your tax obligations is essential.
“If you earn more than £1,000 from these activities, you may need to complete a self assessment tax return.
“Filing early puts you in control – you will know exactly what you owe, can plan your payments, and avoid the stress of the January rush.
“You don’t need to pay immediately when you file – you have until January 31 to settle your tax bill.”
How to register for self-assessment and file a tax return
If you’re submitting a tax return for the first time, you’ll need to register for self-assessment by October 5.
You are taken through the process step by step via the Government website which is on www.gov.uk/register-for-self-assessment.
You start by hitting the “Start Now” button at the bottom of the page.
After you’ve registered, you’ll be sent a Unique Taxpayer Reference (UTR) number in a letter, with instructions on how to set up your Government Gateway account.
Once this is done, you’ll be sent another letter containing an activation code.
You use this to complete the set-up of your account and need to do this as soon as possible as the code will expire.
HMRC says this entire process can take up to 20 working days.
Once you’ve registered, filing a tax return online can be done via www.gov.uk/log-in-file-self-assessment-tax-return.
Make sure you’ve got your UTR number to hand.
You don’t have to complete your tax return in one go and can save your entry then go back to it later if you need to.
Why do you have to submit a tax return on your side hustle earnings?
In some cases, tax is deducted automatically from your wages or pension through PAYE.
However, other forms of income, such as those from a side hustle worth over £1,000 are collected through self-assessment.
This is where the person who owes the tax has to submit a tax return themselves.
You also have to file a self-assessment tax return if you receive any other income from property, capital gains, or dividends.
Do I need to pay tax on my side hustle?
When you’re employed the company you work for takes the tax from your earnings and pays HMRC so you don’t have to.
But anyone earning extra cash, for example from selling things online or dog walking, may have to do it themselves.
Stephen Moor, head of employment at law firm Ashfords, said: “Caution should be taken if you’re earning an additional income, as this is likely to be taxable.
“The side hustle could be treated as taxable trading income, which can include providing services or selling products.”
You can make a gross income of up to £1,000 a year tax-free via the trading allowance, but over this and you’ll usually need to pay tax.
Stephen added: “The applicable tax bands and the amount of tax you need to pay will depend on your income.”
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