Do You Pay Tax on Side Hustle Income UK? The £1,000 Trading Allowance Explained
Published 6th November 2026·Updated 6 November 2026
Reviewed by: Money Saving Advice Editorial Team
Do You Pay Tax on Side Hustle Income UK? The £1,000 Trading Allowance Explained
Yes — if your side hustle income exceeds £1,000 in a tax year, HMRC expects you to report it. If it stays below £1,000, the trading allowance covers it and you owe nothing. This applies whether you are selling on Vinted, doing freelance work, delivering for a food app, or running any other income-generating activity alongside your main job.
The short answer
Summary
- The £1,000 trading allowance means the first £1,000 of side hustle income each year is tax-free — no reporting required
- Over £1,000: you must register for Self Assessment with HMRC and declare the income
- Tax is on profit, not turnover — you can deduct business expenses before calculating what you owe
- The allowance is per person, not per activity — all self-employment income counts towards the same £1,000
- Register by 5 October in the year after the tax year you first exceeded the threshold
The short answer
This guide is for information only and does not constitute financial advice. Always check your eligibility and read the full terms before applying for any financial product.
What is the £1,000 trading allowance?
The trading allowance is a tax exemption from HMRC that lets individuals earn up to £1,000 from self-employment, odd jobs or selling goods in a tax year without paying any tax on it or filing a Self Assessment return.
It covers activities including:
- Selling items on eBay, Vinted, Facebook Marketplace, Etsy or similar platforms
- Freelance or casual work (design, writing, photography, tutoring)
- Survey sites and paid research platforms
- Delivering food or packages as a self-employed contractor
- Renting out tools, equipment or parking spaces
It does not cover income from employment (which goes through PAYE) or rental income (which has a separate property allowance of £1,000).
What happens if I earn over £1,000 from a side hustle?
You need to register for Self Assessment with HMRC and complete a tax return for that tax year.
You register online at gov.uk/self-assessment-tax-returns. You must register by 5 October in the year following the end of the tax year in which you exceeded £1,000. For example, if you first exceeded £1,000 in the 2025/26 tax year (ending 5 April 2026), you must register by 5 October 2026.
The tax return itself is due by 31 January (online) or 31 October (paper) following the end of the tax year.
Do I pay tax on the full amount, or just the profit?
You pay tax on profit — your income minus allowable expenses. You cannot claim both the trading allowance and business expenses in the same tax year. You choose which is more beneficial.
Option 1: Trading allowance method Deduct £1,000 from your gross income and pay tax on the remainder. Simple, no receipts needed.
Option 2: Actual expenses method Deduct your real business expenses from gross income. Better if your costs exceed £1,000.
| Method | Income | Deduction | Taxable | Best when |
|---|---|---|---|---|
| Trading allowance | £3,500 | £1,000 | £2,500 | Low business costs |
| Actual expenses | £3,500 | £1,800 (actual) | £1,700 | Business costs over £1,000 |
What counts as an allowable business expense?
If you use the actual expenses method, you can deduct:
- Equipment used for your side hustle (proportion if also personal use)
- Postage, packaging and materials
- Phone and broadband costs (business proportion)
- Mileage (45p per mile for first 10,000 miles, 25p after)
- Software subscriptions and tools
- Advertising and platform fees
You cannot deduct personal expenses, clothing (unless specialist uniform), or anything not genuinely for business purposes.
What tax rate will I pay?
Side hustle profit is added to your other income (usually your salary) and taxed at your marginal rate.
| Combined income | Tax rate |
|---|---|
| Up to £12,570 (personal allowance) | 0% |
| £12,571 – £50,270 | 20% (Basic Rate) |
| £50,271 – £125,140 | 40% (Higher Rate) |
| Over £125,140 | 45% (Additional Rate) |
You also pay Class 4 National Insurance (6% on profits between £12,570 and £50,270; 2% above) if your self-employment profits exceed £12,570, and Class 2 NI (£3.45/week in 2025/26) if profits exceed £12,570.
HMRC's online Self Assessment return calculates everything — you do not need to work this out manually.
Does selling personal possessions count?
Selling your own used items — clearing out your wardrobe on Vinted, selling old furniture — is generally not trading and does not count towards the £1,000 trading allowance. Personal possessions are not taxed unless you are trading (buying to sell at a profit) or the item falls under Capital Gains Tax rules (applies to assets like jewellery, art or cars above certain values).
If you buy things specifically to resell for profit, that is trading and the allowance applies.
What about HMRC's data-sharing rules with platforms?
From January 2024, HMRC requires digital platforms — including eBay, Etsy, Vinted, Airbnb and similar — to report seller earnings to HMRC annually. This means HMRC has visibility of platform income even if you do not declare it.
This does not change the tax rules — the £1,000 trading allowance still applies. It does mean that undeclared income above the threshold is more easily identified.
FAQ
Do I need to register for VAT as well? Only if your self-employment turnover exceeds £90,000 in a 12-month period (2026/27 threshold). Most side hustles are well below this. If you do exceed it, you must register for VAT with HMRC within 30 days.
Do employed people need to do Self Assessment for side hustle income? Yes, if the income exceeds £1,000. Your employer handles tax on your salary through PAYE, but side hustle income is separate and must be declared through Self Assessment.
Can I use the trading allowance and have a full-time job? Yes. The trading allowance is separate from employment income. Your salary goes through PAYE; your side hustle income uses the trading allowance threshold.
What if I miss the registration deadline? HMRC may charge a penalty. The standard late registration penalty is £100, rising with how late you register. Register as soon as you realise you should have — unprompted registration typically attracts lower penalties than those following an HMRC prompt.
Where does HMRC give official guidance on the trading allowance? See HMRC's guidance at gov.uk/guidance/tax-free-allowances-on-property-and-trading-income.