Since the pandemic, the amount of people earning extra cash each month has grown, leaving many people susceptible to earning more than their personal allowance.

What many people with a side hustle forget is that they are self-employed which can add confusion when it comes to sorting out taxes.

Whether it’s selling on sites like Vinted or Depop, or doing freelance work if people earn more than £1,000 in a tax year, they must register as self-employed with HMRC.

An expert has explained “the biggest mistake people” those with a side hustle can make and warn those who haven’t taken the necessary steps to protect themselves.

Ben Brookes, a partner at Wellers stated that when one is self-employed, they must file a self-assessment tax return and pay the tax themselves.

He said: “It is not automatically deducted from your earnings like when you are employed through the PAYE system.

“Failing to do so can land you in serious hot water with HMRC so it’s worth thinking about this before you start your side hustle.

“The biggest mistake people tend to make when embarking on a side hustle is failing to realise that it means you are self-employed!

“Money coming in outside of your regular employment means you’re potentially both employed and self-employed at the same time, which can be confusing.

“If income from your side hustle, whether that be selling on sites like Vinted or Depop, freelance work, pet sitting, filling in surveys, or delivering for Deliveroo, Amazon, is more than £1,000 in a tax year, you must register as self-employed with HMRC.

Sweeping new tax rules will be introduced on January 1, which could see thousands of people who earn a bit of extra income being caught out by the taxman if they don’t get their affairs in order.

The HMRC move is part of a wider tax crackdown people boosting their income via side hustles, freelancing and self-employment.

HMRC wants to make it easier to spot discrepancies between the information provided by a digital platform and the individual, giving the tax office grounds to launch an investigation.

In the UK, everyone receives a personal tax-free allowance of £12,500. Any income above this threshold is taxed.

If someone earns less than this threshold at their full or part-time job, they can continue to earn tax-free, but it must be declared if it exceeds £1,000. Any income past the £12,500 threshold is taxable.