Tax Rules Explained For Side Hustles

Woman taking a picture of her unwanted clothing items to resale online.

By Rachel Wait | Published - 26 May 2026

Important info

This article is for general guidance only and is not financial or professional advice. Any links are for your own information, and do not constitute any form of recommendation by Saga. You should not solely rely on this information to make any decisions, and always obtain independent, professional advice for your own particular situation. All information in this article is correct at the time of publishing, but laws, entitlements, tax treatments and allowances may change in the future.

A side hustle can be a useful way to supplement your income in later life. But whether you’re making handmade jewellery, selling vintage clothing, or even renting out your driveway, it’s essential to understand when you might need to pay tax on your money-making efforts.

As we explain below, the good news is that there are allowances and rules that could help you keep more of what you earn.

What’s on this page?

When do you need to pay a tax bill?
What’s the difference between trading and selling?
What allowances apply to side hustles?
When does self-assessment apply?
What records should you keep?
What happens if you don’t declare income?

When do you need to pay a tax bill?

Platforms such as Vinted and eBay can be a convenient way to sell items online. But it’s important to be aware of the tax rules.

Since January 2024, these platforms have been legally obliged to report seller information to HMRC, the tax authority, under international reporting rules. However, this doesn’t necessarily mean you’ll need to pay tax on the items you sell.

Arjun Kumar, co-founder of UK tax filing platform Taxd.co.uk, explains: “This isn’t a new tax, it’s just a new way for HMRC to see who is making money.

“These platforms generally trigger a report if you sell 30 or more items or earn over £1,700 in a year. But and this is a big ‘but', HMRC is looking for traders, not casual sellers. If you’re just clearing out the loft or selling clothes for less than you originally paid, you aren’t trading and you won’t owe income tax, even if you sell 50 items.”

Where things change is if you buy items or make products with the intention of selling them at a profit, as this is more likely to be treated as trading income.

“In these circumstances, you would normally need to register for self-assessment and submit annual tax returns,” says Maria Dean, private client tax manager at accountancy firm Kreston Reeves.

Separate Capital Gains Tax (CGT) rules may also apply when selling valuable possessions at a profit. For example, if you sell an item for more than £6,000, you may have to declare this to HMRC and pay CGT.

What’s the difference between trading and selling?

HMRC uses nine indicators, known as the ‘Badges of Trade’, to help assess whether an activity is classed as trading. In practice, this comes down to factors such as your intention and the way the activity is carried out.

Maria Dean explains: “Trading is generally identified where there is a clear aim to make a profit, particularly where there is repeated buying and selling, items are bought specifically for re-sale, or goods are altered or improved to increase their value before being sold.”

By contrast, selling your own personal belongings after decluttering your wardrobe or garage, or making occasional sales rather than selling regularly, is usually very different in nature.

Dean says: “In these situations, there is typically no intention to trade, and no ongoing commercial activity.

“HMRC looks at the overall pattern of behaviour rather than any single sale, so understanding the distinction between trading and personal selling is key when deciding whether income needs to be reported.”

What allowances apply to side hustles?

Most people in the UK can take advantage of both the ‘trading allowance’ and the ‘property allowance'.

The trading allowance allows you to earn up to £1,000 a year, tax-free, from trading income including self-employment or casual services such as pet sitting or gardening. If your side hustle income is under this allowance, you won’t need to report it to HMRC.

The property allowance also lets you earn up to £1,000 a year tax-free from land or property income. This could include renting out your driveway, for instance.

Note that this doesn’t include letting out a room in your home under the Rent a Room Scheme, which comes under separate rules.

When does self-assessment apply?

If your side hustle income is within the above allowances, you won’t usually need to report it to HMRC or complete a tax return.

But this can change if your annual trading or property income exceeds £1,000, as you may then need to register for self-assessment.

Nic Lonsdale, founder of accountancy practice Ginger Bucks, says: “Even if your selling is a side hustle rather than a main income, it still counts as self-employment income and needs to be declared within the self-employment pages of your return.”

If you need to register for self-assessment, you must do this by 5 October following the end of the tax year in question. So, if you earned more than £1,000 in trading income in the 2026-27 tax year, that would mean registering by 5 October 2027. You would then need to file your tax return by 31 January 2028 (if doing so online) and paying your tax bill by the same date.

It’s also worth noting that self-assessment rules are set to change from 2029. Under the proposed plans, those earning between £1,000 and £3,000 from side hustles won’t need to file for self-assessment, although they must still report the income to HMRC and pay any tax due. Those earning more than £3,000 will need to file a self-assessment tax return.

What records should you keep?

Keeping accurate records of any money earned through side hustles is essential. It will help you to work out if any tax is due, as well as how much, and will make it easier to complete a tax return if you’re required to do so.

Arjun Kumar says that: “Good record-keeping is your best Friday afternoon gift to your future self.

“If HMRC ever asks questions, especially now they have more data from apps, you need to prove whether you were trading or just decluttering.

“Keep a simple spreadsheet of what you sold, when, for how much, and what it cost you. Even if you don’t owe tax, having those receipts or screenshots saved digitally protects you from any headaches later.”

You are generally expected to keep records for up to seven years. Keep in mind that online platforms including Vinted and eBay will store your transaction history for you, so you can easily see how much you’ve earned.

What happens if you don’t declare income?

If you fail to notify HMRC about any earnings over the thresholds, you will likely be charged a penalty based on the tax you owe.

This ranges from 30% to 100% of the tax bill, depending on whether the authorities think the error was an accident or deliberate, according to Kumar.

He adds: “There are also automatic £100 fines for missing the January filing deadline, with daily penalties kicking in after three months.”

However, if you have made a genuine mistake and forgotten to report your income to HMRC, don’t panic.

Maria Dean says: “The positive news is that HMRC generally takes a more lenient approach where individuals come forward voluntarily. Addressing the issue early and putting matters right can substantially reduce penalties and lead to a quicker, less stressful resolution.”