We’ve covered this issue before, but with HMRC running a media campaign at present, its worth revisiting.
What Is A Side Hustle?
Side hustles refer to second jobs, small self employments, trading on the side and similar. It causes a fair bit of confusion – years ago I remember in an accountancy practice I worked for a car dealer cleint being adamant that any car he sold after 5pm was “for me, not the business, so I don’t pay tax on it”. It was wrong then, and it is now.
There are no special tax rules for so these so called Side Hustles.
If it is a job – working for someone else – then the employer is required to operate PAYE even if its just for a few hours a week. If you are an employer it is worth noting there is no such thing as “casual labour” – anyone working for you, regardless of hours, needs to go through payroll.
It it is a self employment – eg providing a service such as teaching yoga, tutoring or dog walking; selling goods online or at car boots; letting a property out – then it follows the normal rules for Self Employments or Property Income:
- If the turnover – thats the gross income before expenses – is more than £1,000, then it must be declared to HMRC. At present via Self Assessment but thats changing.
Whats Changed Recently?
First, what has changed? Actually very little. What is new:
- New reporting requirements from online platforms like Ebay, Etsy or AirBnB to HMRC – see below, these platforms are now obliged to kake returns to HMRC rather than simply responding to ad hoc requests from HMRC.
- HMRC are making a bigger noise around side hustles – they probably have some budget for an advertising campaign under one of the many Government “spend to save” type initiatives.
- A recent announcement that during the life of this Parliament – so some when before 2029 – the Self Assessment threshold will go up to £3,000 meaning some kind of simplified assessing for small self employments with between £1,000 and £3,000 of turnover. Not really much to get excited about, you’ll still have to keep accounts, declare to HMRC, and pay tax, just on a different form!
The new rules around online reporting cause some consternation. Platforms like Ebay or Etsy are required to report to HMRC in some circumstances. Here is what Ebay say in their own words:
For residents of the UK, eBay is legally required to report both your sales transactions and certain personal or business information to His Majesty’s Revenue and Customs (HMRC). eBay will report this information should you meet either of the following thresholds within the calendar year:
- Your total sales on eBay is equal to or more than £1,740 after deducting fees and commissions or taxes
- You complete 30 or more sales transactions on eBay (cancelled transactions are not included in the calculation)
Please be aware that UK digital sales reporting requirements do not change your tax and reporting obligations. Per HMRC “If you are just selling some unwanted items that have been laying around your home, such as the contents of a loft or garage, it is unlikely that you will have to pay tax.” You remain responsible for determining whether your eBay sales are subject to tax and complying with all relevant reporting obligations that may arise from your activities on eBay.
That summarises it quite well.
HMRC Intelligence
HMRC have an intelligence platform is known as “Connect.”, which is a powerful data analytics system used to detect tax evasion and fraud. It gathers and analyses data from various sources, including:
-
Banks and financial institutions
-
Land Registry and property records
-
Online marketplaces (e.g., eBay, Airbnb)
-
Social media activity
-
UK and international tax records
By using Connect, HMRC can identify discrepancies between declared income and actual financial activity, helping to target tax investigations more effectively.
Badges of Trade
A question that comes up is where the boundary is between, say, selling your own surplus possessions – not taxable – and trading? Likewise if you provide a services but, say, its for “expenses only” when does that become a business? Normally the boundary is clear, but if unsure we look at the so called “Badges of Trade”:
The key badges of trade include:
- Profit-seeking Motive – If the activity is carried out with the intention of making a profit, it suggests a trade.
- Nature of the Asset – If the item bought and sold is typically held as trading stock (e.g., clothes, cars), this suggests trading. Conversely, assets like paintings or property are more likely to be capital in nature.
- Frequency and Number of Transactions – A high frequency of transactions suggests trading, whereas a single transaction is less indicative.
- Modification of the Asset – If the asset is altered or improved to increase its value before sale, this points toward trading.
- Source of Finance – If an asset is bought using borrowed funds that are repaid from sale proceeds, this suggests a trading intent.
- Time Between Purchase and Sale – A short period between purchase and resale suggests trading, whereas long-term holding indicates an investment.
- Method of Acquisition – If the asset was inherited or received as a gift, it is less likely to be part of a trade compared to something actively purchased.
These badges are not conclusive on their own but are assessed collectively to determine if an activity constitutes a trade.
Returning to the point above, if you provide a service, or do a job, “for expenses only” that doesn’t take it outside of tax – the income is business or employment income, regardless of how described. Of course expenses genuinely incurred for business can be set against your Self Employment income or potentially claimed as Employment Expenses.
Likewise if you derive revenue and describe it as “donations” or “gifts” that doesn’t make the income non taxable – the same rules apply.
Teaching Yoga as a Second Income
What does this mean for Yoga Teachers?
- If you teach classes to the public, group or private, and derive more than £1,000 of income in a tax year, you need to register with HMRC as Self Employed. This applies even if you teach semi pro-bono; teach for expenses only; describe what you receive as gifts or donations; teach community classes.
- If you are paid to teach Yoga by a business or charity, that may be employment income depending on the circumstances, if not its Self Employment income and the £1,000 threshold applies.
Summary
- There are no new “side hustle” taxes
- HMRC are taking a greater interest in such activities, including reporting from online platforms
- Self Employment income, however described over £1,000 is taxable.
