The UK side hustle boom (and why tax planning matters)

It’s never been easier to turn a passion into profit. From TikTok creators monetising their content to bakers selling cupcakes at the weekend, millions of people across the UK are now running side hustles alongside their day jobs. 

What starts as selling handmade jewellery on Etsy or offering freelance graphic design can grow faster than anticipated, and for many, this can be an exciting development. A modest hobby that brings in £50 a month might increase to £200, £500, or more, potentially approaching the earnings of a part-time job. 

The creative freedom can feel liberating – no boss, no corporate constraints, just the chance to explore turning skills into income independently.

Side hustles often provide opportunities that traditional employment may not. They can allow people to test business ideas with relatively low risk, experiment with pricing, explore different markets, and gain confidence in running a venture while a regular job covers living costs. 

At the same time, however, side hustles can introduce challenges. Balancing a growing venture alongside existing commitments can be demanding. And some side hustlers may find that it also brings new responsibilities – such as crossing HMRC’s thresholds for tax obligations.

The £1,000 wake-up call

Even side hustles that feel small can hit key financial milestones sooner than expected – and the £1,000 trading allowance is arguably the most important one to know.

This allowance lets you earn up to £1,000 from your side hustle, tax-free. Crucially, it applies to your gross income (your total revenue before expenses). Once your income for the tax year (6 April to 5 April) creeps over that threshold, you’ll need to declare it to HMRC by registering for Self Assessment.

Think £1,000 sounds like a lot? In practice, selling just £85 worth of products each month will push you over the limit. A handful of weekend dog-walking clients could do the same.

For many, this is the point at which a casual project turns into something with formal obligations. And, as a result, HMRC is already urging side hustlers to check their income for the 2024-25 tax year, recognising that many first-time entrepreneurs may not yet be familiar with the rules. 

This isn’t about stifling creativity or discouraging ambition – it’s about making sure entrepreneurial people don’t end up out of pocket by overlooking their tax responsibilities.

Treat your side hustle as a business

Separating personal and business finances early is likely to reduce headaches later. Opening a dedicated business bank account, even when income is small, can help categorise transactions and simplify record-keeping.

Good record-keeping isn't just for your first tax return. As your venture grows, you'll need to be aware of other milestones. For example, once your profits exceed a certain level (currently £6,845), you may need to start paying Class 2 National Insurance contributions. Much further down the line, if your turnover hits £90,000, you'll need to register for VAT.

Work reimagined

Side hustles reflect a broader shift in how people are approaching work. They point to a move toward self-directed careers, where creativity, adaptability, and entrepreneurial thinking can matter as much as formal experience. For some, side hustles are more than extra income – they are a space to explore a potential career path.

Managing the practical side, such as tracking expenses, filing returns and overseeing growth, is part of the learning curve. While not everyone will scale their venture into a full-time business, gaining experience in these areas can offer valuable skills for future opportunities.

The side hustle trend is reshaping the small business landscape, introducing a generation more comfortable with risk and financial responsibility. The key is recognising when a pastime has become a business.

The first step is simple: check your total side hustle income from the last tax year. If it's over £1,000, visit the HMRC website today to understand your Self Assessment obligations. Taking control now is the first real step in turning your hobby into a blueprint for independence.