Last updated: October 2026 · For the 2026/27 tax year (6 April 2026 to 5 April 2027). General information, not personal tax advice. Scotland has different Income Tax bands.
Making extra money from Etsy, eBay, Vinted, freelancing, tutoring, blogging or YouTube? Then there’s one number you need to know: £1,000. That’s HMRC’s trading allowance. But it’s one of the most misunderstood tax rules in the UK. It isn’t “£1,000 profit tax-free”, and earning £1,001 doesn’t mean you suddenly owe tax on everything.
In this guide I’ll explain side hustle tax in plain English: how the £1,000 allowance works, whether to use it or claim your expenses, how tax works if you already have a job, and exactly when to register for Self Assessment. I’ve linked to HMRC and GOV.UK throughout so you can check the official rules.
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The £1,000 side hustle rule in 30 seconds
| Your situation | What it means |
|---|---|
| Total gross trading income £1,000 or less | You may not need to tell HMRC (exceptions apply). Keep records. |
| Total gross trading income over £1,000 | You generally need to register for Self Assessment. |
| You have several side hustles | The income is added together. You don’t get £1,000 for each one. |
| You sell your own unwanted things | That isn’t automatically trading. |
| A platform reports your sales to HMRC | That doesn’t automatically mean you owe tax. |
Quick checker: allowance or expenses?
Pop in your figures to see which method gives the lower profit. For a fuller estimate alongside your PAYE salary, use my Side Hustle Tax Calculator UK.
Quick checker — 2026/27
This estimates how the £1,000 trading allowance compares with your actual expenses. It does not calculate your final tax bill.
Important: This is an educational estimator, not tax advice. It assumes the income is eligible trading income and does not account for every restriction, losses, partnerships, connected-party income, Universal Credit, student loans, Child Benefit, VAT, Scottish tax bands or other personal circumstances. Confirm your position with HMRC.
Is the £1,000 based on profit or turnover?
Turnover. HMRC means your gross trading income: what you take in before any costs. This is the most important thing to get right.
Say you sell £1,200 of handmade products and spend £700 on materials and fees. Your profit is only £500, but your gross income is £1,200. Because that’s over £1,000, you can’t say “my profit’s under £1,000, so I can ignore HMRC”.
What counts as a side hustle (trading)?
HMRC says you’re probably trading if you sell things you bought to resell for profit, or things you made (even as a hobby), or if you’re paid for a service like freelancing, tutoring or dog walking. Making videos, podcasts and social media content can count too, including gifts you receive for promoting products.
Selling your own unwanted things is different. Clearing out your wardrobe or garage on Vinted, eBay or Facebook usually isn’t trading, and HMRC says you’re unlikely to pay tax just for selling personal items from your home. (Very valuable personal items can fall under separate Capital Gains Tax rules.) My Vinted tax guide has examples.
Several side hustles share one allowance
If you make £600 on Etsy and £700 freelancing, you don’t get £1,000 for each. Your combined gross trading income is £1,300, which is over the limit.
What happens if you earn more than £1,000?
Going over £1,000 doesn’t mean the whole amount becomes taxable. Once you’re over, you choose one of two ways to work out your taxable profit:
- Method 1, trading allowance: deduct a flat £1,000 from your gross income.
- Method 2, actual expenses: deduct your real allowable business costs.
You can’t do both. HMRC says that if you claim the trading allowance, you can’t deduct any other expenses or allowances in that calculation.
Trading allowance vs allowable expenses: which is better?
It depends entirely on your costs. That’s why “always claim the £1,000” is bad advice.
| Example | Trading allowance method | Actual expenses method | Lower profit |
|---|---|---|---|
| £1,200 income, £100 expenses | £200 | £1,100 | Trading allowance |
| £4,000 income, £300 expenses | £3,000 | £3,700 | Trading allowance |
| £4,000 income, £1,800 expenses | £3,000 | £2,200 | Actual expenses |
| £3,000 income, £1,800 expenses | £2,000 | £1,200 | Actual expenses |
The simple rule: if your real costs are under £1,000, the allowance usually wins. If they’re over £1,000, claiming expenses usually wins. These are simplified examples, so check your own position.
What counts as an allowable expense?
HMRC’s guidance covers things like:
- Stock and materials you sell or use to make products
- Platform fees, payment fees, postage and packaging
- Advertising and marketing
- Office costs like stationery, phone and software
- Business travel
- Training related to your business
Some costs are part personal, part business, like your phone or working from home. You can usually only claim the business part, and there are simplified-expense options for some costs. Keep receipts and use a fair method; don’t guess a percentage afterwards. Etsy sellers can read my Etsy fees and tax guide.
What if you make a loss?
If your expenses are more than your income, the trading allowance may not be the right choice. Loss relief has its own rules, so check HMRC guidance or get advice.
Side hustle tax when you have a job
Having a PAYE job doesn’t give your side hustle its own Personal Allowance or its own tax bands. Your salary and your side hustle profit are added together.
For 2026/27, most people get a Personal Allowance of £12,570. In England, Wales and Northern Ireland, the rates are 20%, 40% and 45% across the bands. Your salary uses up the allowance and bands first, so your side hustle profit is taxed at whatever rate is “next” for you.
- Earning £30,000 from your job? You still have room in the basic-rate band, so a modest side hustle profit is likely to be taxed at 20%.
- Close to the higher-rate threshold? Side hustle profit can push part of your income into the 40% band. So it’s wrong to say every side hustle is “taxed at 20%”.
- Over £100,000? You lose £1 of Personal Allowance for every £2 of income over £100,000, and it’s gone completely at £125,140. My £100k tax trap guide explains this.
What about National Insurance?
Your job pays Class 1 National Insurance through payroll. Self-employed profits can be charged Class 4 National Insurance: for 2026/27, 6% on profits between £12,570 and £50,270, and 2% above that. GOV.UK says that if you’re both employed and self-employed, what you pay can depend on your combined earnings, and HMRC works it out after your tax return. Don’t confuse any of this with the £1,000 trading allowance.
Set some money aside
Your job takes tax off automatically, but your side hustle doesn’t. You’ll pay through Self Assessment later. Putting part of your side hustle money into a separate pot avoids a nasty shock in January. If your bill is big enough, HMRC may also ask for payments on account, which are advance payments towards next year’s bill, not an extra tax.
When to register for Self Assessment
If your gross trading income is over £1,000 in a tax year, you generally need to register for Self Assessment. Here are the key dates:
| What | Deadline | Example for 2026/27 |
|---|---|---|
| Register for Self Assessment | 5 October after the tax year ends | 5 October 2027 |
| File your online tax return | 31 January after the tax year ends | 31 January 2028 |
| Pay any tax due | 31 January after the tax year ends | 31 January 2028 |
So if your side hustle started in 2026/27, you don’t have a 5 October 2026 deadline. That date is for the 2025/26 tax year. Always match the deadline to the tax year you’re reporting.
A few more things to know:
- Registering late can mean a penalty. If you think you should already have registered, do it now rather than waiting.
- Registered before? HMRC may ask you to reactivate your account rather than start again.
- Not sure if you need to? Use HMRC’s free checker for additional income.
- Crossing £1,000 doesn’t mean you owe tax. Your bill depends on your profit, Personal Allowance and other income.
Making Tax Digital
Bigger side hustles will also need to use Making Tax Digital for Income Tax, which means keeping digital records and sending quarterly updates. It started on 6 April 2026 for people with qualifying self-employed and property income over £50,000, and comes in from 6 April 2027 for over £30,000 and 6 April 2028 for over £20,000. Most small side hustles are well below this, but it’s worth knowing as you grow.
Does Vinted, eBay or Etsy reporting you mean you owe tax?
No. Since 2024, online platforms have to collect and share some sellers’ details with HMRC. HMRC says being reported doesn’t automatically mean you owe tax. Platform reports use the calendar year (January to December), while Income Tax uses the tax year (6 April to 5 April), so keep your own records rather than relying on a platform statement.
Universal Credit: an important exception
The £1,000 trading allowance is an Income Tax rule only. HMRC says income for Universal Credit is not affected by the trading allowance. If you get Universal Credit, don’t assume “under £1,000 means I don’t need to report it”. Check the Universal Credit self-employment rules that apply to you.
What about the £3,000 reporting change?
You may see headlines about a future £3,000 reporting threshold. Don’t read that as “£3,000 of side hustle income is now tax-free”. The £1,000 trading allowance is still the figure in HMRC’s live guidance. A simpler way to report in future isn’t the same as income being tax-free.
Records to keep
- Sales records, invoices and platform statements
- Bank statements showing money received
- Receipts for business costs, if you’re claiming expenses
- Your gross income before any platform fees
- Notes showing which sales were personal clear-outs and which were trading
HMRC says records must be accurate, complete and readable. A simple spreadsheet is enough for most side hustles.
Common side hustle tax mistakes
- “It’s £1,000 profit.” No, it’s gross income.
- “I get £1,000 for each side hustle.” No, it’s one allowance in total.
- “I can deduct £1,000 and my expenses.” No, it’s one or the other.
- “Vinted reported me, so I owe tax.” Not necessarily.
- “If I earn £1,001, all of it is taxed.” No.
- “My side hustle is always taxed at 20%.” Not if your salary is near a higher band.
- “The 5 October deadline is this year.” Match it to the right tax year.
- “£3,000 is now tax-free.” No.
Side hustle tax UK: FAQs
How much can I earn from a side hustle before telling HMRC?
Up to £1,000 of gross trading income a year is usually covered by the trading allowance. There are exceptions, so use HMRC’s checker if you’re unsure.
Is the £1,000 trading allowance based on turnover or profit?
Turnover: your gross income before expenses.
Can I claim the £1,000 allowance and my expenses?
No. You choose one method or the other.
Can I use the trading allowance if I have a full-time job?
Yes. A PAYE job doesn’t stop you using it, but your salary affects the rate you pay on any taxable profit.
Do I get another Personal Allowance for my side hustle?
No. You have one Personal Allowance across all your income.
When do I need to register for Self Assessment?
By 5 October after the end of the tax year in which your gross trading income went over £1,000.
Do I pay tax just because Vinted or eBay reports me?
No. Reporting isn’t the same as owing tax.
Side hustle tax UK: summary
- The £1,000 trading allowance is based on gross income, across all your side hustles.
- Over £1,000? Choose the allowance or your actual expenses, whichever gives the lower profit.
- Your side hustle profit is added to your salary, so it may be taxed at more than 20%.
- Register by 5 October after the tax year ends; file and pay by 31 January.
- Platform reporting isn’t a tax bill, and Universal Credit has its own rules.
Next steps: run your numbers through the Side Hustle Tax Calculator UK, and read my Vinted tax and Etsy fees and tax guides.
Official sources
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Expenses if you’re self-employed
- GOV.UK: Register for Self Assessment
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: National Insurance, how much you pay
- GOV.UK: Selling goods or services on a digital platform
- GOV.UK: Making Tax Digital for Income Tax
MoneySavvyUK provides general information and personal money-saving content. We’re not accountants or tax advisers. Tax rules change and your circumstances matter, so check GOV.UK or get professional advice before acting.
Related guides and tools
- How to sell on Vinted
- Vinted shipping and parcel sizes
- Vinted seller safety
- My Facebook selling case study
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About the author: Kalpana is a UK mum, former science teacher and PhD scientist. MoneySavvyUK shares practical household money ideas and general information, with official sources linked so you can check the rules for yourself.
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