Millions of British households are being warned about a potential 'tax trap' as they increasingly turn to side hustles to make ends meet, with new data revealing that one in four UK adults now has a second income stream. The trend is driven by wages that no longer stretch to cover everyday essentials such as bills, food, and rent.
Rise of the Side Hustle
According to figures from ecommerce marketing platform Omnisend, 25% of UK adults now have a side hustle or secondary income. For many, this is not about pursuing a passion or building a business empire, but simply about survival. More than half (54%) of those with a side hustle said they started it to earn extra money for bills or essentials, with 83% citing financial reasons. Only 10% said they began a side hustle to pursue a hobby or passion.
The extra income is often modest. Two-thirds (67%) of side hustlers earn £500 or less per month after costs, with many bringing in under £100. Overall, the income generated from side jobs in the UK is estimated at approximately £8.5 billion per month, with most earnings falling within the tax-free allowance.
Tax-Free Allowance and the 'Tax Trap'
Under HMRC's Trading Allowance, individuals can earn up to £1,000 per year tax-free before needing to declare anything. However, experts warn that many people may inadvertently exceed this threshold or fail to keep proper records, potentially falling into a 'tax trap' where they owe money to HMRC.
Marty Bauer, Ecommerce Expert at Omnisend, said: 'For a lot of people, side hustles are no longer about turning a hobby into a business. They are about making ends meet. An extra £100 or £200 a month might not sound life-changing, but when food, fuel, rent and bills are all competing for the same income, it can be the difference between falling short and getting through the month.'
Bauer added: 'What is striking is how practical many of these side hustles are. People are not necessarily investing large sums or taking big risks. They are selling items they own, reselling second-hand goods, and using platforms they already know, such as eBay, Vinted and Facebook Marketplace. That makes online selling one of the easiest ways to start. You do not need a shop, a warehouse or a huge amount of stock.'
Financial Advice and Mortgage Implications
Rohit Kohli, Director at Romsey-based The Mortgage Stop, commented: 'We’re seeing this play out every week in mortgage applications. Two or three years ago, maybe two in 10 clients had a second income stream. Now it feels closer to half. That might be overtime, a second job, a small business, selling on eBay or Vinted, or second jobs with Uber or Amazon.'
Kohli added: 'It tells you normal wages are not keeping pace with real life. The frustration is that people are working more, but not always feeling the benefit. Extra tax, higher bills, rent, childcare and mortgage costs quickly eat into the reward. One thing I would say is that for anyone hoping to use a second income on a mortgage application, paperwork matters. Lenders are scrutinising this more closely. They want to see how long the income has been running, whether it is stable, and whether it can reasonably continue. Keep records organised from day one.'
As the cost of living continues to squeeze household budgets, side hustles are becoming a permanent fixture for many families. Experts advise keeping meticulous records and staying within HMRC guidelines to avoid any unwelcome surprises.
