Do Side-Hustle Apps Pay Tax-Free?

No, money you earn through side-hustle apps isn't automatically tax-free. However, the UK has a £1,000 trading allowance, which means you generally don't need to tell HMRC about qualifying gross trading income if it's £1,000 or less in a tax year.

If you've started making a bit of extra money from your phone, tax probably wasn't the first thing you thought about.

Maybe you've been earning rewards by playing mobile games. Maybe you've completed some surveys or found another way to make money online. At what point does a few extra quid here and there become something HMRC wants to know about?

The answer depends on what you're doing, how much you're earning and what type of income it is.

So, before you start worrying that the £15 you earned from your phone means you suddenly need an accountant, here's how the rules work.

If you're new to earning this way, you can also read our guide to how to make money through apps in the UK, which explains how gaming rewards and other earning opportunities work.

What is the £1,000 trading allowance?

The £1,000 trading allowance lets you earn up to £1,000 in qualifying gross trading or miscellaneous income during a tax year without normally needing to tell HMRC about it.

The UK tax year runs from 6 April to 5 April, and the figure HMRC looks at for the allowance is your gross income. That's the amount you've received before taking off any expenses.

So, if you had £800 of qualifying trading income across the entire tax year, you would generally fall within the trading allowance.

It's also important to look at your relevant income as a whole. You don't get a fresh £1,000 trading allowance for every app or earning method you use.

If you made £600 from one qualifying activity and another £500 from a different one, for example, that's £1,100 in total.

There are circumstances where different rules apply, so if you're unsure whether the trading allowance covers the way you're earning money, it's always worth checking the latest HMRC guidance.

What happens if you earn more than £1,000 from a side hustle?

If your gross trading income is more than £1,000 during the tax year, you will generally need to tell HMRC and register for Self Assessment.

This is where the £1,000 figure can get confusing.

Going over £1,000 doesn't mean HMRC suddenly taxes every penny you've earned. It can create a requirement to report your income, but the amount of tax you actually owe depends on your taxable profit, other income and personal circumstances.

When working out taxable trading income, you may be able to deduct allowable business expenses. Alternatively, you may be able to use the £1,000 trading allowance instead of deducting your actual expenses.

You can't normally use both against the same income, so if your earnings have gone beyond the casual few-quid-here-and-there stage, it's worth checking which approach applies to you.

What is the £3,000 side-hustle threshold?

The £3,000 figure relates to reporting by digital platforms and should not be confused with the £1,000 trading allowance.

You might have seen posts or headlines suggesting there's now a £3,000 “side-hustle tax allowance”, meaning you can earn your first £3,000 tax-free.

That's not what it means.

Digital platforms can be required to collect information about people using them to earn money and report certain information to HMRC when relevant reporting conditions are met.

This can include platforms used to sell goods, provide services or rent property.

The idea is to give HMRC more information that can be used to check whether people are correctly declaring taxable income. It doesn't give everyone another £3,000 they can earn without worrying about tax.

The easiest way to remember the difference is:

£1,000 trading allowance: this is the tax allowance relevant to qualifying trading and miscellaneous income.

£3,000 platform reporting threshold: this relates to information certain digital platforms report to HMRC. It does not mean your first £3,000 is tax-free.

More than £1,000 gross trading income: you will generally need to register for Self Assessment and report your trading income.

Don't use the £3,000 platform reporting figure to decide whether you personally need to pay tax or report your income.

Do you pay tax on money earned from playing games?

Money or rewards you receive from playing games aren't automatically tax-free, and how they're treated can depend on the nature of the activity and your circumstances.

This is becoming a more relevant question as earning money by playing games becomes easier to access.

With Prograd, you can find mobile games offering rewards for completing specific milestones. You might download a game, reach a certain level or complete a challenge within a set amount of time.

You're not being paid an hourly wage to sit and play a game. Instead, there's a reward attached to completing a specific offer.

If you're earning the odd small reward, you may never get anywhere near a point where tax becomes an issue. But if you're regularly earning money from gaming alongside other online activities, it's sensible to keep a record of what you're receiving.

If you're not sure how these gaming offers work in the first place, our guide to making money through apps takes you through the process from choosing an offer to completing the required milestone.

Does all money earned through apps count as trading income?

Not necessarily. Whether money is taxable depends on what you've actually done to receive it, rather than simply whether it came through an app.

Selling unwanted possessions is a good example.

Imagine you bought a laptop for £500 a few years ago. You don't use it anymore, so you sell it online for £200.

Receiving that £200 doesn't automatically mean you've made £200 of taxable trading income. In most everyday cases, selling your own unwanted belongings isn't the same as trading.

That's very different from deliberately buying laptops for £200 because you plan to sell them for £300.

The same idea applies elsewhere. HMRC looks at the nature of what you're doing, not simply whether money has arrived in your bank account through an online platform.

If you're regularly providing services, buying and selling things for profit or carrying out another organised money-making activity, the position can be different.

How should you keep track of money earned through apps?

Keeping a simple record of what you've earned, where it came from and when you received it can save you a lot of hassle later.

You don't need to create an elaborate accounting system because you've earned £20 from your phone.

A basic spreadsheet or another simple record can be enough. If you're using several different apps, make sure you're looking at your relevant income across all of them rather than treating every app as completely separate.

It's also worth remembering that different apps that genuinely pay in the UK can reward you in different ways. You might earn from gaming milestones, surveys or other online offers, so keeping everything together gives you a much clearer picture of what you've actually made.

If you do eventually cross a reporting threshold, you'll be glad you kept track as you went.

Trying to remember where dozens of payments from eight months ago came from isn't anybody's idea of a good afternoon.

Do you pay tax on paid surveys?

Money you receive from paid surveys may count towards your taxable income depending on the nature of the payments and your circumstances, so it's worth keeping track if you're completing them regularly.

For most people doing the occasional paid survey, the amounts involved are likely to be fairly small.

But those amounts can add up if surveys are one of several ways you're making money online.

You might be earning rewards from games, completing surveys and using other earning apps at the same time. When considering the trading allowance, you need to think about your combined relevant income rather than assuming each individual app gets its own £1,000 allowance.

If you're still deciding which types of earning opportunities suit you, our guide to the best apps to make money looks at some of the different options.

Do digital platforms report your earnings to HMRC?

Some digital platforms are required to collect and report information about users and their earnings to HMRC when certain conditions are met.

This doesn't mean everybody whose information is reported suddenly owes tax.

The reporting rules give HMRC more visibility over money being made through digital platforms. HMRC can then use that information to check whether income that should have been declared has been reported correctly.

That's one reason there has been so much discussion about “side-hustle tax”.

The important thing to understand is that platform reporting and your personal tax bill are not the same thing.

If you're selling your old possessions, a platform reporting information doesn't suddenly turn you into a business. Equally, if you're earning taxable trading income, it doesn't become tax-free simply because a platform hasn't reported you.

Your tax position depends on what you're doing and what you're earning.

Do students pay tax on side-hustle apps?

Students aren't automatically exempt from tax, so the same general tax rules can apply to money earned through apps.

There isn't a special rule that makes income tax-free because you're at university.

Where the confusion often comes from is that many students have relatively low overall annual incomes. Depending on how much you earn across the year and your circumstances, you might have little or no Income Tax to pay.

But your student status itself isn't what makes the difference.

The same goes for anyone else using an earning app. You could be at university, working full-time, working part-time or simply looking for a way to make some extra money in your spare time.

The rules are based on your income and circumstances, not what you do during the rest of the week.

Can you earn money from apps without paying tax?

You may be able to earn money through apps without paying Income Tax on it, depending on what type of income you're receiving, how much you earn and your wider tax position.

If your qualifying gross trading income is £1,000 or less, the trading allowance may cover it.

If you earn more than that, it doesn't automatically tell you how much tax you'll pay. Your other income, taxable profit, expenses and available allowances can all affect the final amount.

The easiest approach is not to worry about tax before you've even started earning, but also not to ignore it once the money starts adding up.

Keep a record of what you're making and check the rules if you're approaching the relevant thresholds.

If your goal is simply to bring in some extra money from home, we've also covered 25 ways to make money from home. Just remember that using several different earning methods doesn't necessarily mean HMRC views each one completely separately.

Are apps that let you earn money worth using?

Earning apps can be a useful way to make some extra money from time you'd otherwise spend scrolling or playing on your phone, as long as you have realistic expectations about what you'll make.

There are plenty of apps making huge claims about easy money, which is exactly why it's worth understanding which money-making apps genuinely pay and what you're actually being asked to do before signing up.

Gaming is a good example.

If you're already going to spend some of your spare time playing mobile games, finding one that rewards you for reaching milestones can make that time a bit more worthwhile.

You don't need to turn it into another job or spend every evening trying to squeeze another few pounds out of your phone.

Choose offers that look realistic, play games you actually enjoy and keep track of what you earn.

How can you earn money playing games with Prograd?

Prograd lets you find mobile games that offer rewards for completing specific challenges and milestones.

Instead of downloading random games and hoping there's some way to earn from them, you can browse available opportunities, see what's required and choose the ones that look worth your time.

One game might reward you for reaching a certain level. Another might have several milestones, giving you the chance to earn different rewards as you progress.

If you're completely new to this, start with our guide to how to make money through apps in the UK to understand how the process works, or go straight to Prograd and see what's currently available.

We're not going to tell you you'll get rich playing games on your phone. That's not what Prograd is about.

But if you're going to spend some of your spare time playing anyway, you might as well see whether some of that time could earn you something back.

And if those rewards start adding up, keep a record of them. Tax doesn't need to make earning online complicated, but knowing the basic rules now is much easier than trying to work everything out at the end of the tax year.

This article is for general information only and isn't personal tax advice. Tax rules and reporting requirements can change, and how they apply will depend on your circumstances. Check the latest guidance from HMRC or speak to a qualified tax professional if you're unsure.