By Tax Calculator UK · Published · 7 min read
The £1,000 trading allowance
If your combined gross trading income is £1,000 or less in a tax year, the trading allowance usually means you do not need to report it. This is income before expenses, not profit. Exceptions include partnership income and income from your employer or a company you or a connected person controls. You may still need to register to claim losses or voluntary National Insurance.
Above £1,000 you have a choice: deduct your actual business expenses, or deduct the flat £1,000 allowance instead. You can't do both. The allowance usually suits people with very few costs.
Selling your own things isn't trading
Clearing out the loft and selling your own used items is not usually a business. Buying things to resell at a profit, or making items to sell, usually is. Online marketplaces now report sellers' details to HMRC once they pass set thresholds, but that report doesn't by itself mean you owe tax.
When to register for Self Assessment
If your trading income goes over £1,000, you need to register for Self Assessment by 5 October after the end of the tax year in which you started. The main dates are:
| What | Deadline |
|---|---|
| Register for Self Assessment | 5 October after the tax year ends |
| Paper tax return | 31 October |
| Online tax return | 31 January |
| Pay the tax you owe | 31 January |
| Second payment on account (if due) | 31 July |
How much tax will you pay?
Side income is added to your salary, so it's taxed at your highest rate. If your job already uses your Personal Allowance, profit from a side hustle is taxed at 20% for basic rate taxpayers or 40% for higher rate taxpayers.
Class 4 National Insurance may also apply if your profits pass the lower profits limit. A common rule of thumb is to set aside 25–30% of profit as a basic rate taxpayer and 45% as a higher rate taxpayer, then check the real figure with the self-employed calculator.
Keep simple records from day one
You don't need accounting software for a small side business, but you do need to be able to back up your figures. Keep:
- A list of every sale or invoice, with dates and amounts.
- Receipts for costs you plan to claim, such as materials, postage or platform fees.
- Bank statements, ideally from a separate account used only for the side business.
Making Tax Digital
Making Tax Digital for Income Tax is being phased in from April 2026 for sole traders and landlords with qualifying income above set thresholds. Most small side hustles fall below them for now, but check GOV.UK if your income is growing.
Keep project cash separate from spending money
Set aside room for costs and an estimated tax reserve when assessing a project's reward. The amount arriving from a client is not necessarily the amount available for personal spending.
Frequently asked questions
Do I pay tax on a side hustle under £1,000?
Usually not if you qualify for the trading allowance and your total gross trading income is £1,000 or less. Partnership income, income from your employer and connected-company income can be excluded. Check GOV.UK's eligibility rules.
Check it on GOV.UK: Tax-free allowances on property and trading income (opens GOV.UK in a new tab)
Is the £1,000 based on profit or sales?
Sales. The allowance applies to gross trading income before any expenses are taken off.
Check it on GOV.UK: Income Tax rates and allowances (opens GOV.UK in a new tab) · National Insurance rates and category letters (opens GOV.UK in a new tab)
Can my employer find out about my side hustle?
HMRC may adjust your tax code to collect tax on side income, which your employer would see as a code change, but they aren't told why. Check your employment contract for any rules about second jobs.
Check it on GOV.UK: Tax codes (opens GOV.UK in a new tab)