HMRC issues urgent tax warning to people with £1,000 extra | Personal Finance | Finance

HM Revenue and Customs (HMRC) has issued an urgent tax warning to people with more than £1,000 of extra earnings from a ‘side hustle’.

Anyone who gains extra income outside of their regular job, such as renting out property, creating online content, or selling goods, must register for Self Assessment and file a tax return if their earnings are more than £1,000. In the UK, everyone has a tax-free trading allowance of £1,000 additional income outside of their primary employment, but if you go above this threshold then you must tell the tax office. People who meet this £1,000 threshold and haven’t yet filed their Self Assessment tax return must do so by 11.59pm on January 31, 2026. This deadline applies to anyone who is newly self-employed or has a new source of untaxed income.

HMRC has warned that those who miss the January 31 deadline face an initial late filing penalty of £100 – even if there’s no tax to pay.

HMRC issued a reminder about the £1,000 threshold on X (formerly Twitter) this week, warning: “Got a side hustle bringing in a bit of extra cash? From selling online to freelancing on the side – if you earn over £1,000, you need to let us know.”

According to HMRC, you must register for Self Assessment as a sole trader if any of the following apply:

• you earn more than £1,000 in a tax year (from 6 April to 5 April)
• you need to prove you’re self-employed, for example to claim Tax-Free Childcare
• you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits and State Pension
• you need to register as a subcontractor for the Construction Industry Scheme (CIS) or as a share fisher

More than six million people have headed into the new year with their tax affairs in order, but a whopping 5.65 million people are yet to file their tax returns before the looming deadline at the end of this month.

If tax returns aren’t submitted on time you’ll be hit with an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

The penalties then continue to increase the longer you leave it, with taxpayers facing daily penalties if they haven’t filed three months after the deadline.

At this point, HMRC will issue additional daily penalties of £10 per day, up to a maximum of £900. This will increase yet again after six months with a further penalty of 5% of the tax that is due, or £300 – whichever is higher. After 12 months, another 5% – or a £300 charge, whichever is greater – will be added.

If you pay your tax late, you’ll also get penalties of 5% of the tax unpaid at 30 days, six months and 12 months. If tax remains unpaid after the deadline, interest will also be charged on the amount owed in addition to the penalties above.

Customers who are unable to meet the tax return deadline need to tell HMRC before January 31 and the government department said it will treat those with reasonable excuses fairly.

Anyone unable to pay their tax bill in full by the deadline can also spread the cost using HMRC’s online ‘Time to Pay’ system, but you must file your Self Assessment tax return before setting this up.  

If you can’t pay your tax bill in full, or you owe less than £30,000 and are eligible, you can apply online without having to contact HMRC directly, while those that owe more than £30,000 can still apply but need to contact HMRC.

Myrtle Lloyd, HMRC’s Chief Customer Officer, said: “New Year is a great time to start afresh. What better way than to ensure your tax affairs are in order for another year than completing your tax return. If you have yet to start, the clock is ticking, go to GOV.UK and start today.”