Britons planning to start side hustles in 2026 are being urged by HM Revenue and Customs (HMRC) to familiarize themselves with relevant tax rules. Those engaging in small-scale activities, such as selling used clothing or household items, may not need to worry about taxation unless their earnings exceed certain thresholds.
Under current regulations, individuals can sell personal belongings without paying tax if their total sales amount does not surpass £1,000 annually. This exemption applies to casual sellers who are not classified as official traders. However, should a seller dispose of unwanted items that exceed £6,000 in a single transaction, they must inform HMRC, as this may trigger capital gains tax obligations.
For side hustlers who create or purchase items for resale, the tax landscape changes significantly. If their earnings from such activities exceed the £1,000 limit, they are required to register for Self Assessment as a sole trader. HMRC emphasizes that these activities could be classified as “trading” since they generate income through goods or services. Failure to report these earnings can lead to unexpected tax bills or penalties.
HMRC stated, “If you do need to tell us about money you’ve made from side hustles, you will need to register for Self Assessment as a sole trader. If you don’t tell HMRC when you need to, you could end up with an unexpected tax bill or penalty.”
In cases where individuals are selling items like sweaters or unwanted gifts from their homes, which typically do not approach the £6,000 threshold, there is no requirement to report these sales to HMRC. The agency reassures casual sellers that their small-scale efforts are not subject to taxation.
In addition to these side hustle guidelines, HMRC’s proposed changes to salary sacrifice arrangements have prompted a detailed impact assessment. This report reveals that approximately 3.3 million workers currently sacrifice more than the £2,000 limit for pension contributions. Overall, around 7.7 million workers are benefiting from salary sacrifice options, with nearly 4.3 million of them unaffected by the impending cap.
This information underscores the importance of staying informed about tax regulations, especially for those engaging in additional income-generating activities. With the potential for significant financial implications, understanding these rules is essential for all Britons looking to supplement their income through side hustles in the near future.
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