Tax Rules for Side Hustles: What Small Business Owners Must Know
New trading allowances and tax rules affect side hustle income. Learn what counts as taxable income, how allowances work, and what to report.
Side hustle income is taxable, even if you earn as little as $500 extra during the holidays. The IRS requires you to report all earned income, and failing to do so can lead to penalties. This applies to any money made from gigs, freelancing, or selling goods.
In the UK, new rules on trading allowances change how much you can earn from selling items or providing services before you need to register for tax. The allowance is £1,000 for trading income, but selling personal possessions for profit may have different thresholds.
More people are turning to side hustles for financial flexibility. A former NHS worker paid off debt in five months by starting a bill-reduction side hustle, now working just four hours a day. Meanwhile, a college tutoring business grew into a full-time venture for one Dublin entrepreneur.
What you can do with this
Small online business owners should track all side income and understand local tax rules. Use accounting software to separate personal from business earnings. Consider setting aside a percentage of each payment for taxes to avoid surprises. If you sell items, know the difference between a hobby and a trade, as tax treatment differs.
Questions readers ask
Do I have to pay tax on side hustle income under $500?
Yes, all earned income must be reported to the IRS, regardless of amount. Even $500 from a holiday gig is taxable.
What is the UK trading allowance for side hustles?
You can earn up to £1,000 from trading income (selling goods or services) before you need to register for self-assessment and pay tax.
Can I avoid tax by selling personal items on eBay?
Selling personal possessions at a loss or for less than you paid is usually not taxable. But if you buy items to resell for profit, that counts as trading income.
Sources
- Remember: Side Hustle Income Is Taxable, Even If You Only Earn an Extra $500 for the Holidays AOL.com
- College side hustle turns into thriving tutoring business for Dublin entrepreneur Business Post
- Having a clear out or selling for profit? What the new rules on trading allowances mean for your side hustle newsfromwales.co.uk
- I quit gruelling NHS job after bill-reduction side hustle left me debt free in 5 months - I work just 4 hours a day The Sun
- Watch: Kaizer Chiefs legend Willard Katsande shows off his side hustle iHarare News
- Why more and more of us have a side hustle RNZ
