Side Hustles
What are the Tax Implications of Making or Buying Things to Sell?
If you make or buy items with the intention of selling them for a profit, HMRC may regard you as trading. This could include selling jewellery, clothing, beauty products, pet accessories, food or digital products, or buying items specifically to resell through online marketplaces or auction sites.
If your total gross income from trading activities is £1,000 or less in a tax year, you may be covered by the Trading Allowance and may not need to tell HMRC about this income. The £1,000 limit applies to your total gross trading income before deducting expenses and includes income from other trading activities.
If your total gross trading income exceeds £1,000 in a tax year, you will normally need to tell HMRC. If required to register for Self Assessment, the deadline is generally 5 October following the end of the relevant tax year.
Selling your own unwanted personal possessions occasionally does not normally amount to trading and generally does not give rise to Income Tax. However, Capital Gains Tax can potentially apply to the disposal of certain personal possessions.
Where trading income needs to be reported, you can generally either deduct allowable business expenses when calculating your taxable profit or, if eligible, elect to deduct the Trading Allowance instead. You cannot claim both against the same income.
What are the Tax Implications of Providing Services Outside of my Main Job?
If you provide services in your spare time in return for payment, HMRC may regard this as self-employment. Examples could include virtual assistance, handyman services, personal training, pet services, graphic design or tutoring.
If your total gross income from these and any other trading activities is £1,000 or less in a tax year, you may be covered by the Trading Allowance and may not need to tell HMRC about the income.
If your total gross trading income exceeds £1,000 in a tax year, you will normally need to tell HMRC. This £1,000 threshold applies to your combined gross income from relevant trading activities, rather than separately to each side hustle.
If you need to register for Self-Assessment, the deadline is generally 5th October following the end of the relevant tax year. You should keep appropriate records of your income and business expenses.
What are the Tax Implications of Renting Out my Property?
Whether you let out a property using an agent, run a holiday let or receive income from letting part of your own home, you may need to report the income to HMRC.
If your gross property income is £1,000 or less in a tax year, you may be covered by the Property Allowance and may not need to tell HMRC about the income. If your gross property income exceeds £1,000, you may need to report it to HMRC and pay Income Tax on any taxable profit.
If you let furnished accommodation in your main home, you may be able to claim Rent a Room relief. This can provide up to £7,500 of tax-free income each tax year. The limit is reduced to £3,750 if someone else also receives income from letting accommodation in the same property.
Can I Take Advantage of Multiple Tax-Free Allowances in the Same Tax Year?
Potentially, yes. Different tax-free allowances can apply to different types of income in the same tax year. For example, you may be able to use the Trading Allowance against qualifying trading income and the Property Allowance against separate qualifying property income.
However, the allowances have their own eligibility rules and cannot always be combined against the same income. For example, you cannot use the Property Allowance against income for which you are claiming Rent a Room relief.