Looks like I should be declaring the hours to my airline.
Maybe you should, but airlines don't like pilots 'moonlighting' and it's far easier for them to say 'no' than to have the hassle of determining whether the flying you're doing impacts on flight duty times and the like.
Your on a sticky wicket if you haven't got receipts for your "expenses" and the tax man starts asking questions.
Yes you are and your airline will almost certainly not entertain 'moonlighting' and a second income from alternative employment. This will no doubt be covered in the terms and conditions of your employment.
Your airline is likely to curtail this secondary employment and then you will have no option but to cease instructing.
It's obviously up to you whether or not you carry on instructing 'on the quiet', but to disclose it is almost certainly going to result in the airline objecting and it could cause all kinds of problems with the tax man, as pointed out above.