Beginner's Guide to Tax on Online Earnings in the UK
By Boring Money
28 April, 2025
So, you’ve started making some money online - maybe from selling on Vinted, freelancing, or sharing content that’s getting attention. Whether it’s a side hustle or something more serious, it’s important to understand what HMRC expects from you. We’ll walk you through the key tax rules for the 2025-26 tax year, with clear steps for what you need to do – or don’t. Let’s break it down.
What counts as “online earnings”?
If you’re making money through the internet in any way, HMRC likely sees that as income. Here are some common examples:
Selling products on sites like eBay, Etsy, Depop or Vinted
Doing freelance work like writing, design or coding
Getting paid through YouTube, TikTok, Twitch or Patreon
Running an online course or workshop
Making money via affiliate links or sponsorships
Basically, if money is coming in and it’s not already taxed (like a salary from an employer), it probably needs to be reported.
If you're still unsure, fortunately the government has a helpful quiz which you can take to determine if you need to tell HMRC about your extra income. Click the link below to start.
The Trading Allowance: What is it?
HMRC currently gives everyone a £1,000 tax-free trading allowance each year for small bits of self-employed income. That means:
🟢 If you make less than £1,000 a year from online income, you don’t need to tell HMRC about it or do a tax return. Happy days.
🔴 If you earn over £1,000, you must register for Self-Assessment and file a tax return.
This allowance applies to gross income - that’s before you deduct any costs or expenses.
The rules apply if you are fully self-employed so long as your main source of income is different from your additional income.
Upcoming changes to the Trading Allowance threshold
There's good news on the horizon! The government intends to raise the tax-free Trading Allowance threshold from £1,000 to £3,000 by the end of 2029. However, income over than £1,000 (but less than £3,000) will still need to be reported to HMRC - even if no tax is due.
For those earning between £1,000 and £3,000, the government plans to launch a simplified online platform where you can declare your income without the fuss of completing a full Self-Assessment form. An estimated 210,000 Brits will be eligible for this service once it launches.[1]
Put simply, the rules will change to the following:
The exact date when this will come into effect has not yet been announced, so in the meantime, anyone earning over £1,000 per tax year from online earnings must declare via Self-Assessment as usual. Let's run through how to do this.
When and how to register for self-assessment
If your earnings are above £1,000 for the tax year, even if you don’t owe much (or anything) in tax, you are still legally required to register for Self-Assessment.
You must complete your registration by 5 October
Once you’re in the system, HMRC will expect you to file a tax return and pay any tax due on the previous tax year by 31 January.
E.g. To report earnings for the 2023-24 tax year, you would need to file your Self-Assessment tax return by 31 January 2025.
If you don’t register by the deadline and should have, you could face penalties with automatic fines of £100 minimum. You’ll also be charged interest on late tax payments, and further penalties the longer you leave it.
HMRC has access to payment platforms, online sales data, and bank records. Big Brother’s watching, basically!
How much tax do I need to pay?
Once you’re over the £1,000 allowance, tax is based on your total income - including any day job or other side gigs. It works the same way as your usual Income Tax rate.
Income Tax bands explained
Annual Income | Tax Band | Income Tax Rate |
£0 – £12,570 | Personal Allowance | 0% |
£12,571 – £50,270 | Basic Rate | 20% |
£50,271 – £125,140 | Higher Rate | 40% |
Over £125,140 | Additional Rate | 45% |
Correct as at 2025-26 tax year.
If your online income pushes your total income into a higher tax bracket, you’ll pay the higher rate on the portion that spills over.
Tips to make online earning easier
Keep a log: Use a spreadsheet or app to track your income and expenses as you go
Open a separate bank account for your side income: It’ll keep things cleaner
Set aside tax money: A general rule of thumb? Save 20–30% of what you earn in preparation for self-assessment
Try free tools: Software like QuickBooks Self-Employed, Coconut or FreeAgent (some banks offer it free) can help with invoicing and tax returns
Ask for help if you’re stuck: An accountant or tax adviser can be worth every penny if you’re earning more or unsure what to do
Final thoughts
The rise of the online side hustle is great news for flexibility and creativity, but it also means getting clued up on tax. If you’re earning less than £1,000, you’ve got nothing to worry about. If you’re bringing in between £1,000 and £3,000, you’re in the “lite admin” zone: no need to panic, but don’t ignore it either. And if you’re earning over £3,000, it’s time to take tax seriously and get your Self-Assessment sorted.
All in all, use the allowance wisely, register with HMRC when needed, and keep things clean and above board. Your future self (and your wallet) will thank you. If in doubt, consider contacting a qualified financial adviser for further guidance.
Disclaimer: Tax rules can change, and while this guide is up to date for 2025-26, always check the latest info on gov.uk or get financial advice.
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