Side hustles are a popular way to earn extra money on top of a regular job but there are warnings that people trying to boost their income may face unexpected tax bills.
An accountancy firm believes HMRC is gearing up for a fresh income tax crackdown on those who fail to disclose their incomes from online sales after new figures show the tax authority received reports on the earnings of almost four million online sellers in 2025.
HMRC received reports on the incomes of 3,988,892 online sellers in the calendar year 2025, a 272% rise on the 1,466,171 seller reports it received in 2024, a Freedom of Information request submitted by accountancy firm BDO showed.
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Total online earnings from this group reached almost £55 billion in 2025, more than double the £25.5 billion reported in calendar year 2024. HMRC said the figures are likely to include a mixture of individual sellers or entity sellers such as companies, partnerships, trusts or charities.
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Dawn Register, a tax dispute resolution partner at BDO, thinks that now HMRC has the data, it will go after those it believes are underpaying tax. “HMRC has been concerned for some time that large numbers of people may have been under-declaring incomes earned via digital platforms – but up until now, they haven’t always had the information to prove it,” she said.
“This new data will be an absolute gamechanger for HMRC – and a goldmine for tax inspectors seeking to ensure that online sellers pay the right amount of tax. With a staggering £55 billion of online sales reported to HMRC for 2025, the tax authority will have a huge new target to aim at.”
Register said HMRC is now “in the final stages” of building a system to automatically extract and analyse this new data. “Once complete, this will be used to target its future compliance activity,” she said.
However, a spokesperson for HMRC told MoneyWeek “absolutely nothing has changed”. They added: “People selling unwanted items online from time to time are not liable to pay tax on that activity. As has always been the case, some people trading via websites or selling services online may need to register for self-assessment.”
Where is HMRC getting its side hustle data from?
Since 1 January 2024, digital platforms such as online marketplaces, short term accommodation, food delivery, private hire and content sharing websites have been obliged to collect information on the incomes of those selling on their platforms and report the information to HMRC.
The digital platforms are only required to share information with HMRC where a user makes more than 30 sales per year and earns more than £1,700.
Last year, HMRC began to send out ‘nudge’ letters to people they suspected of not reporting income earned from online marketplace sales. Further compliance activity is expected to follow later this year.
What are the side hustle tax rules?
Anyone who earns more than £1,000 from extra income activities may need to register for self assessment and complete a tax return, according to HMRC.
This extra work, on top of a full-time job, is typically associated with selling items online, dog walking or renting out a room – or even from more risky crypto trading.
Another side hustle route some choose is content creation, or becoming an influencer, where you post videos or reviews on social media often in return for a gift or experience.
The content creator economy in the UK is worth more than £2 billion according to YouTube.
Sometimes experiences or products will be gifted, and often no money will actually change hands, but new guidance has appeared on HMRC’s side hustle website in recent months warning: “When working out your income from creating online content, you must include the value of any gifts or services you received from promoting products online. That’s because these count as income.”
In one example, HMRC said if a brand paid you £700 last year to post product review videos online and gifted you the products worth £300, and then you made £200 from adverts on the videos, your total income will be £1,200 – above the £1,000 tax-free threshold.
Lee Murphy, managing director of online accountancy service The Accountancy Partnership, said: “If you receive something for free and the brand doesn’t expect anything in return, it’s not taxable. It’s a bit like getting a present from your grandmother, she gives it to you because she likes you, not because she wants a shoutout on Instagram.
“However, if there’s an agreement that the creator will post the product or service on their social media to advertise it, then the value of the item or service is classed as income and must be declared to HMRC. It’s considered a form of payment, just not in monetary terms.”
To stay compliant, Murphy suggests content creators will need to determine whether something is truly a gift, what its true market value is and deduct any allowable expenses.
How to report side hustle earnings to HMRC
Depending on your overall income, any earnings above £1,000 from a side hustle may have to be reported to HMRC through self-assessment – before the deadline.
The return and any untaxed earnings owed to HMRC for the previous tax year is due online by 31 January and you could get fined for failing to pay.
HMRC research shows many people are unaware that they may owe the taxman money for so-called side hustles.
Myrtle Lloyd, HMRC’s director general for customer services, said: “Whether you are selling handmade crafts online, creating digital content, or renting out property, understanding your tax obligations is essential. If you earn more than £1,000 from these activities, you may need to complete a self assessment tax return.
“Filing early puts you in control – you will know exactly what you owe, can plan your payments, and avoid the stress of the January rush. You don’t need to pay immediately when you file – you have until 31 January to settle your tax bill.”
Filing early can have other benefits as you will know how much you need to save for your tax bill by the end of January.
Increasing numbers of people have been caught by the self-assessment net in recent years due to frozen tax thresholds. The dividend and capital gains tax allowances have also been slashed, upping the amount of tax to pay on assets.
It comes as HMRC is still working on a new service that could mean up to 300,000 earning extra income from a side hustle may be given an escape from the administrative burden of self-assessment..
How is 'side hustle' tax changing?
Currently, individuals have a trading allowance that makes them exempt from tax for the first £1,000 earned each tax year from what HMRC describes as casual services such as babysitting and gardening.
It can also be used when selling items on popular websites such as eBay and Vinted.
If they make profits above this level, they need to submit a tax return.
However, while the tax-free trading allowance will remain the same, the government has announced that it will raise the reporting threshold for trading income from £1,000 to £3,000, so those earning less than £3,000 won't need to file a tax return.
People with taxable income below the increased threshold, for example from “side hustles”, will instead be able to report tax through a new digital reporting service. Taxpayers will have a choice: they can remain in self-assessment if they wish or use the new service. This simplification will help to cut waste and improve services and avoid unnecessary worry for customers, according to HMRC.
Eve Williams, chief executive of eBay UK, said: “This will be welcome news for thousands of UK sellers for whom eBay is a side hustle and a means of supplementing their household income during challenging times.
"By removing the paperwork associated with selling online, hopefully we will help these side hustles grow into fully fledged small businesses."
No date has been given for the change but the government said it would be by the end of this parliament, which would mean by 2029.
Will I have to pay tax on my 'side hustle'?
The Treasury estimates that raising the reporting threshold for trading income from £1,000 to £3,000 will benefit around 300,000 taxpayers.
An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all.
Others will be able to pay any tax they owe through a simple online service.
Laura Suter, director of personal finance for AJ Bell, said: “With HMRC overwhelmed by the number of people calling their helplines and filing tax returns, any move that alleviates this pressure has to be welcomed.
"Changes to the tax system in recent years mean millions more people have been dragged into paying tax, many of them needing help and support from HMRC. But the taxman is finding it all very taxing, and has struggled to meet this surging demand.
“The government itself says that 90,000 of those filing a self-assessment tax return for this income have no tax to pay, meaning they are needlessly filling out paperwork that HMRC is collecting no tax for. Solving these absurd quirks in the tax system should be applauded. However, the timelines on bringing in this measure are spectacularly vague."
Until these changes come in, it is important to file a tax return if you make £1,000 or more from your side hustle.
Anyone who thinks they may need to complete a tax return can use the checker tool on GOV.UK to find out.
