Yes. Any income from self-employment in the UK is taxable. However, you can earn up to £1,000 per year tax-free under the Trading Allowance. Above £1,000, you must declare the income on a Self Assessment tax return. If your total self-employment income (after expenses) exceeds £1,000, you pay Income Tax and Class 2 and Class 4 National Insurance on the profit above that threshold.

The Trading Allowance is a tax-free allowance for self-employment income. You can earn up to £1,000 per tax year from self-employment without paying tax or needing to register for Self Assessment. You can also use it to offset trading expenses. If your gross income exceeds £1,000, you cannot also claim the allowance — you must declare all income and deduct allowable expenses.

Register for Self Assessment if your trading income exceeds £1,000 in a tax year, or if you receive £2,500 or more in gross rental or other income. Register online at HMRC.gov.uk — you have until 5 October after the end of the tax year to register. If you are earning above the thresholds, register as soon as possible to avoid penalties.

Not necessarily. Most side hustles can be run as a sole trader — simpler, with less administration, and income is taxed as personal income. However, if your side hustle grows significantly, operating through a limited company (Ltd) can reduce your tax bill through lower dividend tax rates. Ltd companies pay Corporation Tax (currently 25%) on profits. Weigh the costs of an accountant and administrative burden before incorporating.

Allowable expenses for a side hustle include: equipment and tools (laptops, cameras, equipment for your trade), software and subscriptions, travel costs (not commuting), home office costs (proportionate to business use), advertising and website costs, professional insurance, professional memberships and training. You cannot claim personal expenses, the cost of your own labour, or capital items over £500 (these are capital expenses and handled differently).

Keep all invoices, receipts, and expense records throughout the year. Bank statements and payment records are acceptable evidence. Digital records are acceptable as long as they are clearly organised. You should retain records for at least 5 years after the tax return deadline (31 January). Good record keeping makes Self Assessment easier and reduces the risk of errors.