Do I need to tell HMRC about my side hustle?
Selling online or freelancing on the side? Here's the simple rule for when HMRC needs to know, and how the £1,000 trading allowance keeps small earnings tax-free.
What this assumes
Each payment on account is half of your net self-assessment liability (income tax plus Class 4 NI, less tax collected at source). Payments on account don't apply if that net figure is £1,000 or less, or if more than 80% of your tax was collected at source. Capital gains and student loan repayments aren't included in the payment-on-account calculation.
Source: GOV.UK — Payments on account
This is an estimate to help you plan, not financial, tax or legal advice.
The mystery January bill, explained
If your first Self Assessment bill was far bigger than the tax you thought you owed, payments on account are almost certainly why. They’re HMRC’s way of collecting tax in advance — a bit like how PAYE takes tax from an employee every month — by asking the self-employed to pre-pay next year’s bill in two instalments.
How they’re worked out
Each payment on account is half of your net self-assessment liability from the previous year — that’s your income tax plus Class 4 National Insurance, after any tax already collected at source. One payment falls on 31 January, the other on 31 July.
The sting in the first year is the timing. On 31 January you pay the balancing payment for the year just ended and your first payment on account for the next year — so it can feel like paying one and a half years’ tax at once. Enter your figures above to see the January and July amounts separately.
When they don’t apply
You’re off the hook for payments on account if your net bill was £1,000 or less, or if more than 80% of your tax was collected at source (common if you’re also employed and only have a small amount of self-employed income). The calculator checks both conditions and tells you if none are due.
Plan for it
The fix is boring but effective: set money aside as you earn. If you know roughly what to expect — and the side hustle tax guide and side hustle calculator can help you estimate the underlying bill — the January deadline stops being a shock. And if you do miss it, the late filing and payment penalty calculator shows what that costs.
General information, not tax advice. Your Self Assessment statement shows your actual payments on account — check it against this estimate, and see GOV.UK.