Side Hustle Income Tax Malaysia 2026: What You Must Declare (And How to Do It)
That is the whole answer, and it catches a lot of people out. Nothing in the Income Tax Act 1967 gives side income a free pass for being small, irregular, or paid straight into an e-wallet. What changes with size and regularity is which form you file and what you can deduct — never whether you declare at all.
Who Needs to Declare Side Income in Malaysia?
LHDN (Lembaga Hasil Dalam Negeri) requires all Malaysian residents to declare their total income from every source, not just their main job. This includes:
You don’t have to guess at what counts. LHDN publishes its own list of activities it treats as a business for tax purposes, and it is unusually blunt: online business (digital economy), night market and stall traders, actors, singers, influencers and product ambassadors, commission earners, tuition centres and lecturers, direct selling and stockists, copywriting, YouTubers and bloggers, agriculture, professional practices, and taxi or e-hailing drivers. Freelance design, food-delivery riding, marketplace selling, affiliate commissions and rental income all sit inside that net.
If your aggregate income — that’s your salary plus all side income combined — exceeds RM37,333 in YA2025, you are legally required to file. Even if you’re below that threshold, it’s good practice to file anyway, because you might be entitled to tax refunds.
Which Tax Form Do You Use?
This is where a lot of people get confused. The form you use depends on whether your side hustle is registered as a business or not.
Form BE is for resident individuals who earn employment income and do not carry on a business. If you do occasional freelance work and haven’t registered a sole proprietorship or enterprise, you’ll likely use Form BE. The deadline is 30 April for a manual submission, or 15 May if you e-file through MyTax — which is what almost everyone does.
Form B is for resident individuals who carry on a business — meaning you’ve registered your side hustle as a sole proprietor or partnership, or LHDN classifies your activity as a business by its regularity and scale. The deadline is 30 June manually, or 15 July via e-Filing.
Not sure which one applies to you? Here’s a simple rule of thumb: if you received a consistent stream of freelance or side income throughout the year and it’s a recurring activity, LHDN may classify it as business income, meaning you’d file Form B. If it was a one-off gig or occasional work, Form BE is typically sufficient. When in doubt, consult a licensed tax agent.
How to Declare Side Income Step by Step
The process is done through LHDN’s MyTax portal (mytax.hasil.gov.my). Here’s a simplified walkthrough:
Step 1 — Log in to MyTax. Use your MyKad number or tax file number. First-time filers need to register an account first.
Step 2 — Select e-Filing. Under the e-Filing section, choose the correct form (Form BE or Form B for YA2025).
Step 3 — Enter your income details. For salaried employees, your EA form from your employer will auto-populate your employment income. You’ll then need to manually enter your side income in the relevant fields. For Form BE, look for “Other Income” or “Statutory Income from Business” sections.
Step 4 — Claim your deductions and reliefs. This is where you can reduce your tax bill. Business expenses directly related to your side hustle can be deducted — things like equipment, software subscriptions, a portion of your mobile bill, and platform fees. Common personal reliefs like EPF contributions, life insurance, and medical expenses also apply.
Step 5 — Review and submit. Double-check all figures, then submit. If you owe tax, you can pay via FPX bank transfer directly through the portal. If you’re owed a refund, it’ll typically be credited to your bank account within a few weeks.
Tax Rates (What You’ll Actually Pay)
Malaysia uses a progressive tax system. These are the resident rates LHDN currently publishes, covering YA2023, YA2024 and YA2025:
| Chargeable Income (RM) | Rate on That Band | Cumulative Tax at Top of Band (RM) |
|---|---|---|
| 0 – 5,000 | 0% | 0 |
| 5,001 – 20,000 | 1% | 150 |
| 20,001 – 35,000 | 3% | 600 |
| 35,001 – 50,000 | 6% | 1,500 |
| 50,001 – 70,000 | 11% | 3,700 |
| 70,001 – 100,000 | 19% | 9,400 |
| 100,001 – 400,000 | 25% | 84,400 |
| 400,001 – 600,000 | 26% | 136,400 |
| 600,001 – 2,000,000 | 28% | 528,400 |
| Exceeding 2,000,000 | 30% | — |
Read it as a ladder, not a cliff. If reliefs bring your chargeable income to RM55,000, you pay RM1,500 on the first RM50,000 and 11% on the RM5,000 above it — RM2,050 in total, not 11% of the lot. This is why a side hustle that nudges you into a higher band is rarely the disaster people imagine: only the ringgit above the line gets the higher rate.
Chargeable income is what’s left after every deduction and relief, so a healthy-looking gross figure often shrinks a long way before the rates touch it.
What Expenses Can You Deduct as a Side Hustler?
If your side income is classified as business income (Form B), you’re allowed to deduct expenses that were wholly and exclusively incurred to generate that income. Examples include:
A laptop or equipment purchased for your work, software tools and subscriptions, a portion of your broadband or mobile bill if used for work, platform fees or commission charged by marketplaces, travel expenses directly related to fulfilling a job, and professional development courses.
Keep your receipts. LHDN doesn’t require you to submit them upfront, but you need to hold onto them for at least 7 years in case of an audit.
Where to Keep Your Side Hustle Money
Keep a separate account for side hustle income and expenses. Record-keeping gets far easier at filing time, and it stops you spending money you owe LHDN. A digital savings account works well here — Versa lets you park the money somewhere that earns daily interest while it waits for the tax bill.
What Happens If You Don’t Declare?
The numbers are published, and they are not gentle. Under section 113(1)(a) of the Income Tax Act 1967, an incorrect return that omits or understates income carries a fine of RM1,000 to RM10,000 and 200% of the tax undercharged. Failing to furnish a return at all, without reasonable excuse, falls under section 112(1): RM200 to RM20,000, up to six months’ imprisonment, or both. Doing it deliberately to evade tax is section 114(1) — up to RM20,000, up to three years inside, and 300% of the tax undercharged.
Paying late is cheaper but still stings: 10% is added to the tax payable once you pass 30 April (non-business) or 30 June (business). LHDN cross-checks platform, bank and third-party data, and marketplace payouts leave a clean trail.
Frequently Asked Questions
Do you have to report side hustle income in Malaysia?
Yes. LHDN charges tax on income from every source, not just your main job, and its published list of taxable business activities names online selling, e-hailing, tuition, influencers, bloggers and YouTubers by name. Whether you end up paying anything depends on your total income after reliefs; whether you declare it does not.
How much side income is tax-free in Malaysia?
There is no separate tax-free allowance for side income — a common and expensive misunderstanding. What exists is a threshold on your total income from all sources. For a single individual (or someone assessed separately with no children), non-taxable income sits at RM37,333 a year, roughly RM3,111 a month, calculated after eligible reliefs and rebates. Married and assessed jointly with no children, it is RM48,000; with one child, RM50,000; with two, RM52,000. Cross the line and the whole return is due, side income included.
Do Shopee, Grab or foodpanda earners need to declare?
Yes, and LHDN names both categories explicitly — online business (digital economy) and taxi or e-hailing drivers sit on its own list of business activities. If it is a regular earning activity rather than a one-off clear-out of your wardrobe, it is business income and belongs on Form B.
What happens if you don’t declare side income in Malaysia?
Understating income carries a RM1,000–RM10,000 fine plus 200% of the tax undercharged; not filing at all risks RM200–RM20,000 or six months’ imprisonment. Filing late rather than never is far cheaper — a 10% increase on the tax payable. Full section references are in the penalties section above.
Do I need to declare income from selling on Shopee or Lazada?
Yes. If you are regularly selling goods online and earning income from it, LHDN considers this taxable income. Occasional sales of personal items (like clearing out old clothes) are generally not taxable, but if it’s a regular business activity, it must be declared.
I’m a fresh grad with a side hustle — what’s the minimum income before I need to file?
You are required to file once your income from all sources, after eligible reliefs and rebates, exceeds RM37,333 a year — about RM3,111 a month. Even below that threshold, file anyway if your employer has been deducting PCB (monthly tax deductions): that is how you get the refund back.
Can I claim relief on my EPF contributions from my side hustle income?
If you voluntarily contribute to EPF as a self-employed person, those contributions can be claimed as a deduction under the EPF/life insurance relief category, up to the applicable limit. This is a great way to reduce your tax bill while also building your retirement savings.
What if I earn income in foreign currency from overseas clients?
Foreign-sourced income received in Malaysia by Malaysian residents is generally exempt from income tax under current rules. However, this is a nuanced area and the rules have been evolving, so it’s worth verifying with a licensed tax consultant or checking LHDN’s latest guidelines.
If you’re managing client payments from overseas, using a service like Wise can save you a lot on currency conversion fees compared to traditional bank transfers. Sign up on Wise for a fee-free first transfer.
Tax season doesn’t have to be stressful. Get your documents together, log in to MyTax, and tick it off before your deadline — 15 May if you file Form BE online, 15 July for Form B. And if the side hustle has been growing, that is a nice problem: once the tax is sorted, read our guide to how to invest your first RM1,000 in Malaysia, or work out where to park your emergency fund before you invest a sen. Self-employed readers should also look at EPF i-Saraan — the government matches voluntary contributions, and those contributions are deductible.
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