Tax on Side Income in the UK, US and Canada: What to Know (2026)

Earning a little on the side feels harmless, until tax season arrives and you are not sure whether you owe anything. The rules differ by country, and the amounts that matter are often smaller than people expect. This guide covers the UK, the US and Canada, using the tax authorities' own published thresholds where we could read them.

This is general information, not tax advice. Rules change every year and your situation may be different, so check with your tax authority or a qualified adviser before you file.

The UK: the £1,000 trading allowance

GOV.UK describes a tax-free trading allowance of up to £1,000 per tax year. It covers income from self-employment, casual services such as babysitting or gardening, and hiring out your own equipment. The figure is your gross income, which means the total before you take off any expenses.

If your gross trading income is £1,000 or less, GOV.UK says you generally do not need to tell HMRC, and the income is fully relieved. You must still keep records, such as invoices, bank statements or payment statements.

If your gross trading income is above £1,000, you need to register for Self Assessment. GOV.UK says to register by 5 October after the end of the tax year in which your income went over the limit. Once registered, you can either deduct your real expenses or use the allowance instead, giving you up to £1,000 of relief. You cannot do both. If your costs are higher than the allowance, claiming real expenses may be better.

There are exceptions. The allowance does not apply to income from a company you or a connected person controls, to partnership income, or to income from your employer or your spouse's employer.

The US: Schedule C and the $400 line

The IRS says sole proprietors report income and expenses on Schedule C, which is part of Form 1040. It also says Schedule SE is required if your net self-employment earnings from all businesses are $400 or more. Schedule SE is how self-employment tax is worked out, and that tax covers Social Security and Medicare.

Payers generally do not withhold tax from self-employed people, so you may have to make estimated tax payments during the year. The IRS points to Publication 505 for the details. If you only look at this when you file, a side hustle can produce a bill you did not plan for.

Canada: report it, even a loss

We could not open the Canada Revenue Agency's own page in preparing this guide, so treat this section as a summary of a secondary source, a MoneySense article, and confirm each point with the CRA.

According to MoneySense, sole proprietors report business income on their personal return using Form T2125, Statement of Business or Professional Activities. A loss still has to be reported, and it can be deducted against other income that year. Self-employed filers have until 15 June to file, but any tax owing is due on 30 April.

The article also says you must register for GST/HST once your sales reach $30,000 within a calendar quarter or across four consecutive quarters, and that self-employed people pay both halves of Canada Pension Plan contributions once net self-employment income plus pensionable employment income passes $3,500. It notes that advisers often suggest setting aside 25% to 30% of income for tax. Check all of these with the CRA before relying on them.

What to do in practice

• Keep a simple record of every payment you receive, with the date, the source and the amount.

• Save screenshots or statements from platforms that pay you, because accounts can close.

• Record your costs too, such as software or equipment you use for the work.

• Set money aside as you earn, so a tax bill does not come as a shock.

• If you earn from several countries, remember that where you live usually decides where you report.

What counts as income

Many people assume that only large amounts count. In practice, tax authorities look at the type of income as well as the amount. Payments for freelance work, tasks or services are often treated as trading or self-employment income, even when they arrive in small pieces through PayPal or mobile money. Cash back, referral bonuses and similar rewards can be treated differently, and the answer can depend on your country. When in doubt, ask.

If you are paid by an overseas platform, do not assume the platform has reported anything on your behalf. You are usually responsible for declaring what you earn where you live. You can read more about how payouts work in our guide to receiving PayPal payments in Nigeria, Ghana and Kenya.

Instuly Pulse is our own platform, so take this as our note rather than tax advice. Earnings from surveys and other activities on it can count as income depending on where you live, so keep your records whatever platform you use.