We all know that HMRC is well-equipped to uncover tax discrepancies, and their methods are becoming increasingly sophisticated. They can even delve into your personal bank accounts.

Now, they’re taking a closer look at side hustles, those additional incomes that many of us rely on to make ends meet and ask, is casual income taxable or not?

What’s a Side Hustle?

In simple terms, a side hustle is when you earn casual money from something that’s not your primary job. With the rising cost of living, side hustles have become a lifeline for many. People are finding creative ways to boost their income, whether it’s renting out their space on Airbnb, offering their driveway as a parking spot, or working as freelance designers, writers, or even food delivery couriers.

HMRC and the Gig Economy

Big changes are on the horizon for side hustles. Starting from January 1, 2024, various apps and websites that facilitate these gigs will need to share user details, including bank account information, with HMRC. Some of the platforms affected include Airbnb, Etsy, Deliveroo, Upwork, Fiverr, and Uber. While some of these platforms already report user income to HMRC, the new rules will make it a universal requirement.

Enforcing Side Hustle Tax Rules

To ensure compliance, HMRC is investing £39.9 million in a specialised team of 24 experts. Their job is to identify inconsistencies between income reported through digital platforms and tax returns. If they spot irregularities, HMRC won’t hesitate to launch tax investigations.

Am I Affected by the New Rules?

If you have a side hustle or casual income, it’s crucial to report and pay your taxes accurately. You can earn up to £1,000 per year from self-employment without incurring any tax, thanks to the Minimum Trading Allowance. However, if you make more than that, you must complete a Self-Assessment Tax Return and settle any income tax and national insurance dues. Neglecting this could lead to significant penalties and fines.

With an estimated 7.25 million gig workers in the UK, these rules are bound to affect a substantial number of people.

What Should You Do Next?

If your side hustle earns you more than £1,000 per year, your first step should be to register for Self-Assessment. You are required to register for Self Assessment with HMRC at the very latest by 5th October following the end of the tax year in which you started your side hustle.  For example if your casual income exceeded £1,000 in September 2022, this falls in the 2022/23 tax year and as such you should have registered for Self Assessment by 5th October 2023. 

We always recommend that your register sooner rather than later and we’re here to assist you with this process if needed. 

Additionally, if you’ve earned money but haven’t reported it, it’s in your best interest to come forward voluntarily. This increases the likelihood of facing lower penalties. If HMRC uncovers undeclared income through an investigation, the bill will be considerably higher.

Finally, if your side hustle is growing and you need guidance on how to expand your business, our team of accountants is here to help. We’ve assisted numerous small start-ups in developing into successful firms with turnovers ranging from thousands to millions of pounds. As an additional resource, we have written a help eBook “Maximising Your Tax Deductions”  along with our spreadsheets to keep track of your business mileage and use of home as office enhanced claims.

Your side hustle is more than just extra cash; it’s a valuable venture, and we’re here to support your journey. Talk to one of our accountants today to explore the possibilities or book a discovery call today.