Earning extra cash? Check the tax situation!

There are many ways to boost your income. But whether it is signing up as a delivery driver, completing surveys on the internet or becoming a YouTuber, there are important tax considerations to be aware of. Our guidance can help you steer clear of any pitfalls with your taxes.

Taking a second job

You may have to pay tax and National Insurance on your earnings from a second job. Our Having more than one job factsheet tells you everything you need to know about taking a second or subsequent job, from a tax, National Insurance and benefits perspective.

Starting a side hustle

This could include: 

• Becoming a delivery rider or driver.
   
• Offering casual services locally – whether ironing, sewing, cake baking, flower arranging, dog walking or babysitting.
   
• Freelancing – can you do marketing/writing/translating/tutoring? There are plenty of ways to share your skills these days, particularly via online platforms.

Our Tax if you work in the gig economy page covers the main things you need to know whether you are doing this type of work as your main activity or fitting it in around other work.

Social media

There are lots of ways to make money from your social media presence, including by creating YouTube videos or starting a blog/becoming an online influencer. 

If you earn less than £1,000 (before any expenses are deducted) from this type of activity, then the trading and miscellaneous income allowance means you might not need to report it or pay tax on it, depending on your other circumstances. 

If you earn more than £1,000 (before any expenses are deducted) from this type of activity, then you may be able to use the trading and miscellaneous income allowance. However, you will still need to report your income:

• If what you are doing is like running a business (you are trading), you should register for Self Assessment and complete a tax return to declare your income and expenses like any other self-employed individual. This is the case even if it doesn’t really feel like work and even if you only do it part time!
   
• If it is more of a hobby, then any profit you make will still be taxable but as ‘miscellaneous’ income instead of self-employed income. In this case you still need to tell HMRC about the income. However, HMRC may be able to collect any tax owed on it by adjusting your PAYE tax code instead. You may have a PAYE tax code if you have a job at the same time as doing the social media work. If they can’t, then you will need to complete a tax return to declare your miscellaneous income and expenses. Read more about miscellaneous income.

The line between a hobby and a business is blurred. If what you do is not regular and organised and you don’t have a strategy to make money from your social media presence, then it is possibly more of a hobby. This is something we will developing more guidance on shortly.

If you have a successful social media presence you might receive gifts or payments in kind for promotion, as well as or instead of cash. This can be anything from a new mobile phone to endorse or a pair of shoes to review. If it’s a payment in kind or gift in exchange for promotion (even if you receive it out of the blue), it’s probably considered a taxable amount and you should include the value in your figures when you are working out your income. The value will usually be the amount of money you could sell it for. 

The expenses rules for this type of activity can be quite complex, although in reality few social media stars will have significant expenses other than maybe some IT equipment. We are developing some specific guidance for this area which we will post on our website in due course. In the meantime, keep good records of all of the things you spend money on in case you can offset the expense against the income to reduce the amount you pay tax on.

Selling items

If you are selling things you no longer want – whether in a car boot sale, on eBay, on local online and offline marketplaces – in most cases there won’t be any tax consequences to worry about. But see our guidance for more information. This also applies if you are recycling old mobile phones/laptops/other unused devices etc. through trade-in sites. 

However, if you regularly sell things you have bought or made specifically to sell on (vintage clothes or arts and crafts for example), HMRC may consider that you are trading. In this case you may need to complete a Self Assessment tax return like any other self-employed individual, unless your gross income (before expenses) is less than the trading and miscellaneous income allowance of £1,000. See our self-employment guide for more details.

Renting out things that you own

• Renting out a room in your home: If you take in a lodger, the income you make may be covered by the Rent a Room exemption.
   
• Renting out your parking space or other land or property: you may be able to benefit from the property allowance and not pay tax or report anything at all to HMRC – see our guidance.
   
• Renting out other things that you own, for example power tools or garden equipment: the trading allowance can cover income received from renting out personal equipment.

Making money online

For example:

• Answering surveys or testing products for research companies. You can earn cash, vouchers and rewards for giving honest feedback.
   
• Watching videos or playing games – some companies pay people to watch adverts and videos hoping they will go viral or that the viewer will engage with other content.
   
• Other ‘click’ work – you can get paid on a weekly or monthly basis for doing other types of online work in your spare time.

This type of activity is unlikely to amount to ‘trading’ and so wouldn’t be classed as self-employment income. However, it may be taxable miscellaneous income. As the amounts you can make tend to be quite small, the income may be covered by the trading allowance. There is information at What is the trading allowance? which includes examples of the position if you have more than one source of trading, casual or miscellaneous income.

Other

• Cashbacks when shopping: usually these are seen as a discount on the goods/services purchased rather than an income. So they shouldn’t be taxable unless they meet the criteria to be an annual payment (can be applicable even if paid more than annually!).
   
• Cryptocurrencies – our dedicated page covers the tax consequences whether you make or lose money.

Benefits

Earning extra money from any of the activities in this article might affect any benefits you receive. If you receive any means-tested benefits or benefits that can be affected by earnings, you should contact the relevant government department or your local authority. They will be able to tell you how it affects your benefits.

If all of this sounds a little complicated, don’t worry – our guidance can help you understand your tax obligations. We are keen to get feedback on our guidance – so if you think we should provide more guidance on certain areas or cover other areas, please contact us.