5 Taxable Ways to Earn Extra Income in the UK (And What to Tell HMRC)
Published 30th of March 2011·Updated 6 April 2026
Reviewed by: Reviewed for accuracy April 2026
Extra income in the UK falls into two categories: tax-free income (such as the first £1,000 from a hobby or rental under the trading and property allowances) and taxable income, which must be declared to HMRC. The five methods below all produce taxable income. Failing to declare it can result in a fine of up to 100 per cent of the unpaid tax, plus the tax owed.
Short Summary
Any self-employed or freelance income you earn on top of your regular salary is taxable above the relevant HMRC allowances. You must register as self-employed with HMRC and submit a Self Assessment tax return for each tax year in which you earn over £1,000 from self-employed activity.
The methods below are legitimate and accessible to most adults in the UK. Some require upfront time investment; others can produce income within days of starting.
Keep records of all income and expenses from the start. HMRC can investigate up to four years of records for innocent errors and up to 20 years in cases of fraud.
If you are unsure what you need to declare, the HMRC self-employment helpline (0300 200 3504) and the free guidance on GOV.UK are good starting points.
1. Mystery shopping
Mystery shopping pays you to visit shops, restaurants and service providers, ask a set of questions and complete a transaction. Legitimate mystery shopping companies - including Grassroots, Ipsos Mystery Shopping and Serve Legal - reimburse your transaction costs and pay a fee of between £5 and £25 per assignment. Some assignments are completed by phone or online and take under 15 minutes.
Never pay a joining fee to a mystery shopping company. Legitimate operators do not charge to register. If a site asks for upfront payment, it is a scam.
2. Selling skills as a freelancer
If you have a marketable skill - writing, graphic design, bookkeeping, web development, photography, tutoring - you can sell it through platforms such as PeoplePerHour, Fiverr or Upwork. Earnings vary widely, from a few hundred pounds a month for occasional work to a full-time income for those who build a client base. You set your own rates and work to your own schedule.
Register as self-employed with HMRC as soon as you start earning. Keep invoices for every job and record any business expenses (software subscriptions, equipment) as these are deductible against your profits.
3. Delivery driving
Driving for a grocery retailer, food delivery platform (such as Deliveroo or Just Eat) or courier company provides regular, flexible income. As a self-employed driver you earn a per-delivery fee and can often keep tips. Typical hourly earnings range from £10 to £14 before fuel costs, depending on location and platform. You will need a clean driving licence, your own vehicle, appropriate business insurance and a smartphone.
Note that delivery driving insurance is a specific class of cover. Your standard private motor insurance does not cover you for paid delivery work; driving without the correct class of insurance is a criminal offence.
4. Direct sales and commission-based selling
Direct sales companies such as Avon, Usborne Books and Utility Warehouse operate on a commission model. You promote products to customers in your network and earn a percentage of each sale. Income depends entirely on your sales volume, so treat realistic expectations as essential before signing up. Check the company's terms, understand the commission structure, and verify whether there is any sign-on fee or minimum purchase requirement before committing.
Earnings from direct sales are fully taxable as self-employment income and must be reported to HMRC.
5. Starting a small online business
Platforms such as Etsy, eBay, Vinted and Shopify make it straightforward to sell handmade goods, second-hand items or digital products online. Occasional sales of personal possessions below the £1,000 trading allowance do not need to be declared. Anything above that threshold requires registration with HMRC. Income from a sustained online business - selling craft items, vintage clothing or digital downloads - is self-employment income and taxed accordingly.
| Income source | Taxable? | HMRC registration needed? | Good for |
|---|---|---|---|
| Mystery shopping | Yes | If over £1,000/year | Flexible, occasional earners |
| Freelance skills | Yes | Yes | Those with a professional skill |
| Delivery driving | Yes | Yes | Those with a car and licence |
| Direct sales commission | Yes | Yes | Networkers and sociable sellers |
| Online selling (sustained) | Yes | If over £1,000/year | Makers, collectors, resellers |
Frequently Asked Questions
Do I need to tell HMRC about small amounts of extra income?
You do not need to declare extra income below £1,000 in a tax year, thanks to the HMRC trading allowance. Above that, you must register as self-employed and submit a Self Assessment return. If you already complete a Self Assessment return for another reason, all self-employment income must be declared regardless of amount.
What happens if I don't declare taxable extra income?
HMRC can charge a penalty of up to 100 per cent of the unpaid tax, plus the original tax owed, plus interest. They can also investigate several years of returns. If the failure is deliberate, the penalty rises and prosecution is possible. The risk is not worth it; registering and declaring is straightforward via GOV.UK.
Can I deduct expenses from my self-employment income?
Yes. Allowable business expenses reduce your taxable profit. Examples include equipment you buy solely for the work, business mileage (at the HMRC approved rate of 45p per mile for the first 10,000 miles), professional subscriptions and a proportion of your home phone bill if used for business calls. Keep receipts for everything.
Is mystery shopping genuinely legitimate?
Yes, genuine mystery shopping companies are real businesses that contract with retailers and hospitality firms. The key warning sign of a scam is any request for an upfront payment or registration fee. Legitimate companies - including Grassroots and Ipsos - never charge to join and you can apply directly through their websites.
How do I register as self-employed in the UK?
Go to GOV.UK and search "register as self-employed". You will need your National Insurance number and a Government Gateway account. You must register by 5 October in the tax year after the one in which you started earning. For example, if you started in the 2025/26 tax year, you must register by 5 October 2026.