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Do I need to register with HMRC if I make money from my side hustle or hobby?

If you have a side hustle or hobby that earns you money, you may have to register with HMRC.

A woman teaching a young girl the piano in a private lesson

Here are things we would suggest you need to think about:

Trading Income: If your side hustle or hobby generates income that is considered trading income, you may need to register with HMRC. Trading income typically involves regular and continuous activities aimed at making a profit. Examples include selling items on eBay, offering freelance services, or running a small business.

Trading Income Threshold: Currently the income threshold in the UK is £1,000. You may not need to register if your total trading income is below this amount. This allowance allows you to earn a certain amount of money tax-free. However, it's essential to keep records of your income and expenses, even if you don't exceed this amount.

Taxable Income: If your income from the side hustle or hobby exceeds the trading allowance (£1,000), you should register with HMRC and report your earnings. Your taxable income is the amount you earn after deducting allowable expenses related to your side hustle. You will be required to pay income tax on the taxable income.

Self-Assessment: In most cases, people with side hustles or hobbies that generate taxable income will need to complete a Self-Assessment tax return. This is where you report your income and expenses to HMRC and calculate the tax you owe. You can do this yourself, but many people prefer to use an accountant.

National Insurance Contributions: Depending on your income, you may also need to pay National Insurance contributions. The rules can vary, so it's crucial to check with HMRC or consult with your accountant to see if this applies to you.

VAT (Value Added Tax): If your hobby or side hustle involves selling goods or services and your turnover exceeds the VAT registration threshold (currently £85,000 in the UK), you may need to register for VAT.

It's essential to keep accurate records of your income and expenses related to your side hustle or hobby, even if you don't initially exceed the thresholds for registration.

Finally, consider seeking advice from a professional to understand your own personal tax obligations. Here are just a couple of reasons why:

  • Tax laws can change, so it's important to stay up to date with the latest information from HMRC.

  • If you fail to register and comply with the guidance, you are likely to receive

penalties and be fined, so it's crucial to understand your obligations and meet them.

We can help and many clients have peace of mind in knowing that ‘We take care of the numbers so you don’t have to.’

Contact Anne or one of the team via email or call the office on 01788 815017.

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