Side Hustle Tax: What SMEs, Traders and Online Businesses Need to Know

The UK’s side hustle economy has grown rapidly in recent years. From traders selling on eBay and Amazon, to service providers freelancing online, to SMEs diversifying with additional revenue streams—more and more people are earning money outside of their main income.

But with HMRC’s latest changes, it’s never been more important to understand what counts as taxable income, what needs to be declared, and how to stay compliant. Here’s what business owners need to know.

The £1,000 Trading Allowance

If you earn under £1,000 per year from “trading income” (such as selling goods, services, or freelance work), you don’t need to tell HMRC. This is known as the trading allowance.

Once you go over £1,000, however, you’ll need to declare this income, and it may be subject to tax. For SMEs and online traders, this means keeping a close eye on even small or irregular sales.

The Reporting Threshold Is Rising

HMRC has announced plans to increase the Self-Assessment reporting threshold from £1,000 to £3,000 by the end of 2029.

This change means that many smaller traders, freelancers and side hustlers will have more breathing room before they need to submit a full Self-Assessment tax return. However, even if you earn below the threshold, you still need to keep accurate records of your income and expenses.

This increase aims to simplify reporting for smaller earners, reduce administrative burdens, and encourage honest, transparent record-keeping across all industries.

New HMRC Online Tool

To help individuals and businesses stay on top of their obligations, HMRC has launched a new online tool.

By answering a few simple questions about your income—such as how much you’ve earned, how often, and what kind of work you’re doing—the tool helps you determine whether you need to register for Self-Assessment.

This is designed to remove uncertainty and make compliance easier for both individuals and businesses.

Data Sharing From Apps and Platforms

A major change that all traders and online businesses need to be aware of is that apps and platforms are now required to share income data directly with HMRC.

This includes well-known platforms such as:

• Airbnb

• Uber

• Vinted

• eBay

• Etsy

• Amazon Marketplace

If you are selling goods, renting property, or providing services through these platforms, HMRC will already have visibility of your income. This makes accurate reporting more important than ever.

Record-Keeping Matters More Than Ever

Even if your business income is modest, keeping accurate records is essential.

Best practice includes:

• Logging all sales and income streams

• Saving invoices, receipts, and platform statements

• Recording expenses (equipment, advertising, subscriptions, mileage, etc.)

• Maintaining a separate business bank account for clarity

With platforms now reporting directly to HMRC, strong record-keeping will help ensure your figures match and avoid unnecessary queries.

When a Side Hustle Becomes a Business

If your “side hustle” is structured, consistent, and generating regular income, HMRC may view it as a business rather than a casual activity.

This applies to many online traders and service providers who advertise, sell regularly, or treat their side hustle as a commercial activity. In these cases, registration for Self-Assessment—and potentially VAT—may be required.

Final Thoughts: Clarity and Compliance

The new HMRC changes are designed to increase transparency, simplify compliance, and ensure that all taxable income is declared.

For SMEs, traders, and online businesses, the key takeaways are:

✔ Be aware of the £1,000 trading allowance

✔ Understand that the reporting threshold will rise to £3,000 by 2029

✔ Use HMRC’s new online tool to check if you need to register

✔ Keep detailed records of all sales and expenses

✔ Remember that apps and platforms now share your data with HMRC

Staying informed and proactive means avoiding penalties—and focusing on growing your business with confidence.

Need support managing your accounts or staying compliant? At Roseberry Accountancy, we specialise in helping SMEs and online businesses navigate tax rules with ease.

Get in touch here to see how we can help you.