HMRC Cracks Down on Side Hustle Income – Are You Declaring Everything Correctly?

Something Has Quietly Changed

If you earn money outside your main job, whether that is selling through eBay or Vinted, renting out a room on Airbnb, doing freelance work through Fiverr, creating paid content, or taking delivery work through an app, HMRC now has much more visibility over that income than it did a few years ago.

This is not a new “side hustle tax”. The tax rules on extra income have always existed. What has changed is the level of data HMRC receives from digital platforms and how easily that data can be compared with Self Assessment tax returns.

Since 1 January 2024, many digital platforms have been required to collect information about sellers and service providers. Annual reports are then sent to HMRC after the end of the calendar year. The data for the 2025 calendar year was due to be reported by 31 January 2026.

If you have been earning side income and have not been declaring it correctly, the issue is no longer simply whether HMRC might find out. It is whether the data already being reported by platforms matches what you have told HMRC.

What Has Actually Changed?

New reporting rules for digital platforms came into effect from 1 January 2024. Platforms must collect and report certain information about people who earn money through their services. The rules are based on the OECD’s Model Reporting Rules, which are designed to improve international tax transparency.

The rules can apply to platforms that help people earn money from activities such as:

• Selling goods online
• Providing services
• Renting out property
• Renting out transport
• Delivery, taxi or task-based work
• Freelance or creative services provided through digital marketplaces

To be clear, if you are not trading and are only occasionally selling unwanted personal items, there is usually no tax to pay. HMRC has made this point clearly. Selling old clothes, furniture or personal belongings from your home is not the same as running a business.

However, if you buy items to sell at a profit, regularly provide services, earn income from online content, or rent out property, you may need to register for Self Assessment and pay tax on your profits.

There is no new “side hustle tax”. The rules for individuals have not changed. What has changed is HMRC’s ability to see what you are earning and cross-reference it against what you have declared.

Which Platforms Are Sharing Data With HMRC?

Digital platforms that fall within the reporting rules must collect and report relevant information to HMRC. This can include platforms such as Airbnb, eBay, Vinted, Etsy, Amazon, Fiverr, Deliveroo, Uber, Uber Eats, TaskRabbit, TikTok Shop and other online marketplaces or app-based platforms, depending on how they operate.

The data reported can include:

• Your name
• Your address
• Your date of birth
• Your National Insurance number or tax identification number
• The total amount paid to you through the platform
• Fees or commissions charged by the platform
• The number of transactions
• Relevant property details where the income relates to property rental

For sellers of goods, there is a reporting exclusion where a seller makes fewer than 30 sales of goods in a calendar year and receives no more than €2,000, approximately £1,700, for those sales. This is a platform reporting threshold, not a tax-free allowance.

The reporting exclusion for low-volume goods sellers does not mean there is no tax if you are trading. The UK tax position still depends on whether you are trading, whether you have made a taxable profit, and whether your total gross trading income is above the £1,000 trading allowance.

For services, property rental and other reportable activities, the platform reporting rules can apply more broadly. This means HMRC can now match platform data against Self Assessment records and identify gaps more easily.

What Is HMRC Doing With This Data?

HMRC has already been using data from online platforms to send letters to people it believes may have undeclared income. These are often called “nudge letters”.

A nudge letter is not the same as a formal tax investigation, but it should not be ignored. It usually means HMRC holds information suggesting that you may have earned income that has not been declared, and it is giving you the opportunity to review your position.

If you receive a letter, or you know you should have declared income and have not, the best approach is to take advice and correct the position before it escalates. A voluntary disclosure is generally treated more favourably than an error HMRC discovers through an enquiry or compliance check.

The Trading Allowance: What It Covers and What It Does Not

Not all side income creates a tax bill. The trading allowance lets you earn up to £1,000 of gross trading income in a tax year without having to pay tax on it or tell HMRC, provided there are no special circumstances that require you to register.

There is also a separate £1,000 property allowance for certain property income, such as renting out land, storage space, a driveway, garage or property through a platform.

These allowances are separate. In some cases, you could have up to £1,000 of trading income and up to £1,000 of property income in the same tax year and not owe tax on either.

However, the threshold applies to gross income, not profit. So if you earn £1,200 from Etsy sales and spend £400 on materials, your gross income is still £1,200. You may need to register and report the income, even if your profit is only £800.

You also need to choose between using the allowance and deducting actual expenses. You cannot claim the £1,000 trading allowance and also deduct your business expenses against the same income. If your costs are more than £1,000, claiming actual expenses may be better.

The government has discussed simplifying reporting for people with lower levels of trading income, including a possible £3,000 threshold for reporting outside Self Assessment. However, this does not mean the first £3,000 is tax-free, and until any change is fully in force, the £1,000 trading allowance remains the key figure to work from.

When Does a Side Hustle Become a Business?

This is the question that trips most people up, and it is also one HMRC focuses on when reviewing platform data.

Selling a few old personal items from your wardrobe, loft or garage is not usually trading. Buying items specifically to resell at a profit, doing it regularly, and operating in a business-like way is much more likely to be trading.

HMRC looks at factors such as:

• How regularly you sell
• Whether you buy or make goods with the intention of selling them at a profit
• Whether you are making consistent profit
• Whether you market your activity
• Whether you have repeat customers
• Whether you operate through a shopfront, brand, website or platform profile
• Whether the activity is organised like a business

If HMRC concludes your activity is a trade, income tax and potentially National Insurance may be due on the profits. This applies even if you did not realise the activity had become taxable.

If your side hustle has grown to the point where it feels more like a business than a hobby, it is worth getting proper advice. Our post on sole trader vs limited company covers the structural options clearly, and working with start up accountancy specialists at that transition point can save significant time and money compared with untangling the position retrospectively.

Property Letting as a Side Income: Airbnb and Short-Term Lets

Renting out property is one of the most common forms of side income in the UK, and it is firmly in HMRC’s sights.

Short-term lets through Airbnb and similar platforms are now reportable under the digital platform rules. If you are letting a property and not declaring the income correctly, platform data may eventually flag the discrepancy.

For those renting out a furnished room in their main home, the Rent a Room scheme allows up to £7,500 per year tax-free. If the income is shared with someone else, the limit is usually £3,750 each. This relief applies to furnished accommodation in your own home, not to a separate investment property or whole property let where you are not living there.

For landlords with investment properties, rental profits are taxable income and need to be declared through Self Assessment. Allowable deductions can include letting agent fees, insurance, maintenance and repair costs, accountancy fees, and certain other costs linked to the property. Mortgage interest for individual landlords is subject to the basic rate finance cost restriction, so it needs to be treated correctly.

Our post on deductible expenses for landlords covers what you can and cannot claim in detail.

It is also worth being aware that the Furnished Holiday Lettings regime was abolished from April 2025. For individuals, the change applies from 6 April 2025, and for companies it applies from 1 April 2025. Our post on the abolition of the Furnished Holiday Lettings regime explains what that means if you previously used that treatment.

For anyone with rental property income, whether it is a single buy-to-let or a growing portfolio, working with accountants property investors and landlords rely on means the tax position is managed correctly and no deductions are missed. And if your letting activity involves commercial properties or managing property on behalf of others, accounting for property management specialists can handle the full accounting picture.

More broadly, if your property activities are generating significant income and you have not reviewed the tax structure in a while, property tax accounting specialists can model your position and identify whether changes to structure, timing or ownership would reduce your liability.

Crypto, Delivery Work and Other Common Side Hustles

Cryptocurrency

If you have been buying and selling cryptocurrency as a side activity, gains above the capital gains annual exempt amount may be taxable. For the 2026 to 2027 tax year, the annual exempt amount for individuals is £3,000.

Crypto activity can also generate income tax rather than capital gains tax in some circumstances, such as certain staking, mining, rewards or trading activity. The correct treatment depends on what you did and how the income or gains arose.

HMRC has been clear for some time that crypto gains and income need to be declared where taxable. Our post on HMRC’s reminder to crypto investors to declare gains is worth a read if you hold digital assets. Crypto platforms and exchanges are also increasingly subject to data-sharing requirements, so undeclared gains are becoming easier for HMRC to identify.

Delivery and Ride-Hailing Apps

Income earned through platforms such as Deliveroo, Uber Eats, Uber, or similar apps is usually self-employment income. It should be declared through Self Assessment where required, and you can deduct allowable expenses such as equipment, mileage at HMRC’s approved rates, and insurance connected to the work.

National Insurance may also be payable on self-employment profits above the relevant thresholds.

Freelance and Creative Work

Income from platforms such as Fiverr, Upwork, Toptal, YouTube monetisation, TikTok Shop, affiliate marketing or paid content creation is usually trading income. The £1,000 trading allowance may apply, but above that, you may need to register for Self Assessment and declare the income and expenses.

This includes non-cash rewards in some cases, such as gifts, products, services or affiliate benefits received in return for promotional activity.

What If You Have Not Declared Income From Previous Years?

If you have had side income in previous tax years that has not been declared, the sensible course of action is to take advice and make a voluntary disclosure to HMRC.

HMRC distinguishes between unprompted disclosures and errors it discovers itself. Penalties for unprompted disclosures are generally lower than penalties for prompted disclosures or deliberate concealment.

For a genuine mistake, an unprompted disclosure can sometimes reduce the penalty significantly, and in some cases to nil. Deliberate behaviour is treated much more seriously, and penalties can be much higher, especially where offshore income or assets are involved.

HMRC has a formal disclosure route, the Digital Disclosure Service, which can be used to bring undeclared income up to date. An accountant can help you calculate what is owed, prepare the disclosure correctly, and present it to HMRC in a way that demonstrates cooperation and reduces unnecessary penalty exposure.

Do not ignore this. Platform data is now flowing to HMRC systematically, and the window for getting ahead of the issue is narrowing.

Record Keeping for Side Hustle Income

Whether or not you have previously been on top of this, now is the time to put good record-keeping habits in place. For side income that needs to be declared, you should keep:

• Records of all income received from each platform or source
• Records of all allowable expenses, including receipts, invoices and bank statements
• Details of any assets bought and sold, especially for capital gains
• Bank statements showing income received
• Platform reports and annual summaries
• Mileage logs where you claim mileage
• Records of stock, materials or tools bought for resale or business use

Keeping these records in a structured way makes your Self Assessment tax return easier to complete and gives you evidence to support your figures if HMRC asks questions.

For growing side businesses, cloud-based accounting software makes this much easier. Working with xero bookkeeping services specialists means your income and expenses are tracked in real time, your bank transactions are reconciled, and you have a clearer picture of your tax position throughout the year.

If you would rather not manage the bookkeeping yourself, bookkeepers in Nottingham based or remote can take it off your hands, and our post on why accurate bookkeeping is crucial for business success explains why investing in it early pays off.

Making Tax Digital: What Is Coming for Side Hustlers

Making Tax Digital for Income Tax is being phased in for self-employed people and landlords.

From 6 April 2026, those with qualifying income over £50,000 based on the 2024 to 2025 tax year need to use MTD-compatible software, keep digital records and submit quarterly updates to HMRC.

The threshold then reduces:

Qualifying income includes gross income from self-employment and property before expenses. If your side income grows and pushes you above the relevant threshold, you may need compatible software and a more regular reporting rhythm.

Our post on Making Tax Digital quarterly update returns explains what this means in practice and what you need to have in place.

For those whose side income has grown to the point where it is becoming a second business in its own right, the overlap between Self Assessment, MTD, VAT registration and bookkeeping creates a level of complexity that benefits from professional oversight. An outsourced finance services arrangement gives you qualified support across all of these areas without the overhead of an in-house finance function.

Frequently Asked Questions

I sold a few things on Vinted last year. Do I need to declare it?

Not necessarily. If you were selling your own used personal items, such as clothes from your wardrobe, this is usually not trading income, even if the platform reports your data to HMRC.

If you were regularly buying items to sell at a profit, making items to sell, or operating in a business-like way, that is different. If your gross trading income was more than £1,000 in the tax year, you may need to declare it.

Will HMRC tell me if a platform has reported my income?

Not usually in advance. HMRC uses platform data to compare against Self Assessment returns and to identify people who may need to file a return but have not done so. If there is a discrepancy, you may receive a nudge letter, compliance check or enquiry. By that point, the burden is on you to explain the position.

What is the penalty for not declaring side hustle income?

It depends on whether HMRC views the failure as a genuine mistake, careless error, deliberate behaviour or deliberate concealment. Penalties can range from nil in some unprompted genuine error cases to much higher percentages of the tax owed for deliberate behaviour. Interest is also charged on tax paid late. Getting ahead of HMRC through voluntary disclosure is usually the better option.

I earned £3,500 from Airbnb renting out my spare room. What do I owe?

If you were renting a furnished room in your own home, the Rent a Room scheme may cover up to £7,500 per year tax-free. If you share the income with someone else, the limit is usually £3,750 each.

If the property was an investment property, a separate self-contained let, or somewhere you do not live, the Rent a Room scheme will not usually apply. In that case, the rental profit may be taxable and should be reviewed properly.

Can I deduct expenses from my side hustle income?

Yes, if they are wholly and exclusively for the purpose of the business activity. If you use the £1,000 trading allowance, you cannot also deduct actual expenses against the same income. If your actual expenses exceed £1,000, you may be better off claiming those instead. Keeping records from the start makes this calculation straightforward.

Does my side income affect my tax code at my main job?

It can. If you file a Self Assessment return, HMRC may adjust your PAYE tax code to collect underpaid tax or payments on account through your wages in a later year, where the rules allow. This can reduce your monthly take-home pay. Being aware of your overall tax position throughout the year helps avoid surprises.

Do I need to register for Self Assessment if I earn less than £1,000?

Usually not for trading income covered by the trading allowance, provided there are no other reasons you need to file a tax return. However, if HMRC contacts you, or if you have other untaxed income, property income, capital gains or complex circumstances, it is sensible to check before assuming you do not need to do anything.

Get Your Side Income Position Sorted

HMRC now has more visibility into side income than at any previous point. If you have been earning money through digital platforms and are not sure whether you have been declaring everything correctly, the time to address it is now, not when a compliance letter arrives.

FHP Accounting helps individuals and business owners across Nottingham and the UK get their tax affairs in order, from accounting Nottingham based clients with straightforward Self Assessment returns to those with more complex multi-income positions.

If you need to review your side income tax position, make a voluntary disclosure, or simply understand what you should be declaring, we will give you clear, practical advice.

Book a free initial consultation today and let’s make sure you are on the right side of HMRC’s data.

Kellee Quigley

I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.