Many people now earn extra income alongside their main job. Whether it is freelancing, online selling, content creation, tutoring, or delivery work, what starts as a side hustle can quickly turn into a taxable business. Knowing when you need to register as self employed is essential to stay compliant and avoid penalties.

This blog explains when a side hustle becomes a real business in the eyes of HMRC and what action you need to take.

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What Counts as a Side Hustle?

A side hustle is any activity you carry out in addition to your main job with the intention of earning money. Common examples include:

Freelance or consultancy work
Selling goods online or at markets
Social media content creation
Ride-hailing or delivery services
Coaching, tutoring, or creative work

If the activity is more than a one-off and you are trying to make a profit, HMRC may view it as trading.

When Does a Side Hustle Become a Business?

There is no single test, but HMRC looks at several indicators, often referred to as the “badges of trade”. Your side hustle is more likely to be considered a business if:

You are making regular sales or providing services frequently
You intend to make a profit
You advertise or promote what you do
You keep records and operate in a business-like way
You reinvest money back into the activity

If these apply, you are likely trading and should consider registering as self employed.

The £1,000 Trading Allowance

You do not need to register as self employed if your total gross income from trading activities is £1,000 or less in a tax year.

This is known as the trading allowance.

Important points to note:

The £1,000 limit is based on income, not profit
If you go over £1,000, you must register for Self Assessment
Once registered, you can choose to deduct the £1,000 allowance or claim actual expenses, not both

When Must You Register as Self Employed?

You must register as self employed if:

Your side hustle income exceeds £1,000 in a tax year
You are trading regularly with the intention of profit

Registration must be completed by 5 October following the end of the tax year in which you started trading.

For example, if you started your side hustle in the tax year ended 5 April 2025, you must register by 5 October 2025.

What Happens After You Register?

Once registered, you will need to:

Submit an annual Self Assessment tax return
Pay income tax on your profits
Pay Class 2 and Class 4 National Insurance if applicable
Keep proper records of income and expenses

You may also need to consider VAT registration if your taxable turnover exceeds the current VAT threshold of £90,000.

Common Mistakes Side Hustlers Make

Assuming small or casual income does not need reporting
Waiting too long to register
Confusing profit with turnover
Not setting money aside for tax
Forgetting about National Insurance

These mistakes can lead to penalties and unexpected tax bills.

Final Thoughts

Turning a side hustle into a real business is an exciting step, but it comes with tax responsibilities. If your income exceeds £1,000 or your activity looks like a trade, registering as self employed is not optional.

If you are unsure whether your side hustle needs to be declared, or if you would like help registering and completing your Self Assessment tax return, professional advice can help you get it right from the start.

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Side Hustle to Real Business