How to start a side hustle and make money

10 ideas for side hustles

1. Provide a service in your neighbourhood, such as childminding, dog grooming or gardening.
2. Take online surveys or get paid to test apps and websites.
3. Sell your artwork, photography or crafts online.
4. Offer your services as a freelancer in your spare time.
5. Rent out some space - a driveway, garage or a spare room.
6. Start a dropshipping business on Amazon.
7. Become a virtual assistant.
8. Teach English online.
9. Sell items at markets or festivals.
10. Become a social media influencer.

Side hustles and tax - your questions answered by leading small business accountancy firm GoSimpleTax

• Is income from my side hustle taxable?
• When do i have to pay tax?
• Do I have to report earnings from freelancing or a second part-time job?
• Do I need to register my side hustle?
• How much tax is payable on my side hustle?
• Can I claim any side hustle tax expenses?
• What side hustle tax records must I keep?
• Do I need to register for VAT?
• How do I report my taxable side hustle income?

Is income from my side hustle taxable?

If you sell unwanted possessions online or at a local car boot sale, you won’t have to pay tax. They are personal possessions, it’s an occasional thing and you’re making little profit. The same is true if you sell old toys on Facebook or pre-loved clothes via Vinted.

When do I have to pay tax?

If you’re buying raw materials to make things to sell regularly or you’re buying stock to sell to customers, you’re trading and earning money from self-employment. The same applies if you are making money from your hobby, selling things online or selling services, such as babysitting or dog-walking. These earnings can be subject to income tax if your gross income (the total amount you make in sales) is more than £1,000. The “trading allowance” allows you to earn up to £1,000 of trading income tax-free.

Need to know: Find out whether you need to tell HMRC about additional income on the GOV.UK website.

Do I have to report earnings from freelancing or a second part-time job?

If you freelance to supplement your main wage and earn more than £1,000 in gross income a year, you must report it to HMRC. You will pay tax if your total taxable income goes over the Personal Allowance (£12,570 for the 2023/24 tax year).

If you have a second job - for example, if you work in a pub at weekends - you may be paid through the staff payroll and taxed accordingly, after supplying your tax code. So, you won’t need to submit a tax return; but you must report any tips you receive, because they can be taxable income.

Do I need to register my side hustle?

If your gross trading income is more than £1,000 a year and you’ve never registered before, you must register for self assessment (unless you register and run your side hustle as a limited company, which brings different rules and responsibilities).

You'll be sent a Unique Taxpayer Reference (UTR) that will allow you to set up a Government Gateway account. Once you’ve set up the account, you’ll get an activation code in the post.

If you haven’t registered for self assessment previously, you must do so before 5 October in your business’ second tax year, otherwise HMRC could fine you. The UK tax year runs from 6 April until the following 5 April.

Need to know: If you’ve submitted self assessment tax returns previously, you’ll need your old UTR to register and set up your new account.

How much tax is payable on my side hustle?

You pay tax based on your net profits - total sales revenue after you’ve deducted the business expenses from your side hustle. Once any tax allowances have been accounted for and your other taxable income factored in (which can include wages from employment), HMRC will work out your tax bill. You must provide all of these figures to HMRC via your tax return.

You’re taxed according to the income tax band into which you fall. Thanks to the personal allowance, there is no tax to pay on the first £12,570 you earn. The personal allowance decreases by £1 for every £2 of net income over £100,000 and if your net income is £125,140 or more, you don’t get the personal allowance. Income tax bands and rates are different in Scotland.

Need to know: Side hustlers earning more than £12,570 a year must also pay Class 2 National Insurance contributions (NICs) of £3.45 a week. If you earn over £6,725 and below £12,570 you don’t need to pay, but you’ll still receive the benefits that come from paying Class 2 NICs. Class 4 NICs of 9% are payable on profits between £12,570 and £50,270, with 2% payable on profits over £50,270 (*2023/24 tax year for all figures). NICs rates for the self employed will be charging from April 2024.

Can I claim any side hustle tax expenses?

To help lower your tax bill, you can claim for a wide range of tax expenses - the legitimate costs that you pay to start and run your side hustle. You must list these in your annual self assessment tax return. Allowable expenses include:

• raw materials or stock;
• printing and packaging;
• phone use and broadband;
• fuel, parking, train or bus fares;
• premises costs (eg rent, heating, lighting, business rates);
• office stationery and postage;
• advertising and marketing costs;
• insurance and bank charges;
• accounting and solicitor fees;
• training and professional membership fees;
• wages paid to others who work for you.

If you run a home-based side hustle, you may be able to claim for a proportion of your heating, electricity and water costs, Council Tax, mortgage interest or rent, broadband and telephone use.

If you use traditional accounting (ie you record income and expenses by the date you invoiced or were billed), you can claim capital allowances when you buy equipment, machinery or a car, van or lorry for your side hustle. If you use cash basis accounting (ie you only record income and costs in your accounts when you are paid or pay money out) and buy a car for your business, you can claim this as a capital allowance, but everything else must be claimed as an allowable expense.

Rather than working out your business expenses, you can claim flat-rate simplified expenses for vehicle use and working from home. You can’t claim any tax expenses or capital allowances if you claim the £1,000 tax-free trading allowance.

Need to know: Many expenses are not allowable for tax purposes, including entertaining customers, travel costs to and from your normal place of work, parking and speeding fines, work clothes or lunches.

What side hustle tax records must I keep?

You must keep accurate, up-to-date records of your sales and expenses, detailing amounts and dates. If you grant credit, you should retain copies of all invoices you send out, as well as receipts and invoices for things you claim as tax expenses. Keep a detailed mileage log if you plan to claim for fuel costs.

Need to know: If your records are not accurate, complete and legible, HMRC can charge you a penalty, which can also apply if your self assessment tax return isn’t accurate. You must keep your records for at least five years after the 31 January online tax return deadline for each tax year.

Do I need to register for VAT?

You must register for VAT if your total VAT-taxable turnover (ie sales or income that is subject to VAT) for the past 12 months was more than £90,000 (the VAT threshold for 2024/25, previously £85,000) or you expect your VAT-taxable turnover to go over the VAT registration threshold in the next 30 days.

You can choose to register voluntarily for VAT if your turnover is less than the VAT registration threshold, which can be worthwhile if you’re paying a lot of VAT on the things you buy for your business.

If you’re registered for VAT you must add the right amount of VAT to the price of all goods or services you sell; keep records of how much VAT you pay for things you buy; account for VAT for goods you import; digitally report the amount of VAT you charged and paid each quarter; pay any VAT you owe to HMRC.

You cannot charge VAT unless you are VAT registered.

How do I report my taxable side hustle income?

You must complete and file a self assessment tax return (the SA100) each year, summarising your other taxable income, expenses, allowances, pension payments and benefits (if applicable). You must also complete and file the supplementary tax return page SA103, summarising your side hustle income, tax expenses and any allowances.

Once you have registered, you can file your tax return any time after the tax year finishes on 5 April; the annual deadline for filing your self assessment tax return online is midnight on 31 January. If you miss the filing deadline, a £100 fine is payable immediately. Once HMRC receives your tax return, they’ll work out your tax bill and let you know how much you owe.

Need to know: If you don’t pay income tax on your taxable side hustle income and HMRC finds out, you could be faced with a hefty fine. Late tax payments can also result in fines and interest.