The £1,000 Trading Allowance: UK Side Hustle Tax in 2025/26

Quick answer

If you have UK self-employed income (gig work, freelancing, reselling, OnlyFans, tutoring, etc.) in 2025/26:

• Up to £1,000 gross: no tax due, no Self Assessment needed.
• Above £1,000 gross: must register for Self Assessment and either:
  • Use the £1,000 trading allowance instead of actual expenses (better if expenses < £1,000), OR
  • Itemise actual expenses (better if expenses > £1,000).

The £1,000 is gross turnover — not profit. Track it carefully if you're close.

What counts as "trading"

HMRC defines trading by the "badges of trade" — typically you're trading if:

1. You buy with the intention of selling at a profit.
2. The sales are frequent and systematic.
3. You modify or improve items before sale (cleaning, repackaging, upcycling at scale).
4. You're operating in a business-like manner (separate bank account, branding, social media).
5. You advertise your services or products.

You're not trading if:

• You sell personal items you previously bought for personal use (clothes from your wardrobe, books you've read, furniture from your house).
• You sell at a lower price than you originally paid (personal possessions losing value).
• It's a one-off sale of an inherited item or gift.

The £1,000 trading allowance — three uses

Introduced in 2017, the £1,000 trading allowance has three applications:

1. Full exemption (turnover ≤ £1,000)

If your total annual trading turnover is £1,000 or less, you don't need to:

• Register for Self Assessment.
• File a tax return.
• Pay any income tax or NI on that income.

This is the most common use. A side hustle making £80/month doesn't need any HMRC interaction.

2. Partial exemption (turnover £1,001-£~£2,000)

If turnover is above £1,000 but expenses are minimal, you can:

• Register for Self Assessment.
• Deduct the £1,000 allowance from gross turnover (instead of itemising expenses).
• Pay tax on the remainder.

This is simpler than tracking actual expenses when expenses are low.

3. Property allowance (separate £1,000)

There's a separate £1,000 property allowance for rental income (gross rent under £1,000 = no tax). The two allowances stack — you can have £1,000 trading + £1,000 property = £2,000 combined tax-free.

Worked examples

Example 1 — Sarah, occasional Vinted seller

Sarah sells her own pre-loved clothes on Vinted, earning £600/year. She originally paid more for them than she's selling for.

• Trading? No — these are personal items selling at a loss.
• Tax due? None.
• Self Assessment needed? No.

Sarah doesn't need to do anything. Vinted may report her sales to HMRC (since January 2025), but HMRC won't pursue because no trading is occurring.

Example 2 — Mark, eBay reseller

Mark buys vintage cameras at car boot sales and flips them on eBay for profit. 2025/26 sales: £850.

• Trading? Yes — buying to sell.
• Tax due? None (under £1,000 allowance).
• Self Assessment needed? No.

He keeps informal records but doesn't formally engage with HMRC.

Example 3 — Mark scales up

Mark's 2026/27 sales reach £3,200. His costs (buying inventory, fees, postage) are £1,400. Profit £1,800.

• Trading? Yes.
• Self Assessment needed? Yes — must register by 5 October 2027.
• Use trading allowance or itemise?
  • With £1,000 allowance: £3,200 - £1,000 = £2,200 taxable.
  • With actual expenses: £3,200 - £1,400 = £1,800 taxable.
  • Itemising wins — £400 lower taxable income.

If Mark is a basic-rate taxpayer, itemising saves him £400 × 20% = £80. Plus Class 4 NI on the £400 = £24. Total saving from itemising: £104.

Example 4 — Lisa, tutoring side income

Lisa is a full-time teacher. She tutors after school, earning £35/hour, 3 hours/week, 40 weeks/year = £4,200/year. Her costs (printing materials, online subscriptions) are £180/year.

• Trading? Yes.
• Self Assessment needed? Yes.
• Use trading allowance or itemise?
  • With £1,000 allowance: £4,200 - £1,000 = £3,200 taxable.
  • With actual expenses: £4,200 - £180 = £4,020 taxable.
  • Trading allowance wins — £820 lower taxable income.

Lisa uses the allowance because her expenses are tiny.

Platform reporting since January 2025

A major change for UK side hustlers: from 1 January 2025, online platforms must report seller earnings to HMRC.

Which platforms

The reporting rule (UK adoption of OECD Model Rules) applies to platforms facilitating:

• Sale of goods (eBay, Vinted, Etsy, Amazon Handmade, Depop, Facebook Marketplace, Gumtree).
• Rental of property (Airbnb, Booking.com, Vrbo).
• Personal services (Uber, Deliveroo, Just Eat, TaskRabbit, Bark, Thumbtack, Fiverr, Upwork — for UK-based sellers).
• Transport rental (Turo, etc.).

Reporting threshold

Platforms must report to HMRC if you exceed in a calendar year:

• More than 30 sales transactions, OR
• Earnings above €2,000 (~£1,735).

Below both — no reporting required.

What HMRC sees

Platforms report:

• Your name, address, NI number / passport / national ID.
• Tax residence.
• Bank details receiving payments.
• Total gross earnings on the platform for the year.
• Total fees / commissions deducted.

HMRC matches this against your Self Assessment (if any). Mismatches trigger nudge letters or enquiries.

Why this matters

If you've been earning £3,000/year from a side hustle and not filing Self Assessment, HMRC now knows. Pre-2025 they relied on whistleblowers and audits; from 2025, they have the data directly.

If you're in this category — bring yourself into compliance via Self Assessment for the year. Late registration penalty can be waived if you self-correct before HMRC contacts you.

When trading allowance doesn't help

You can't use the trading allowance if:

• You're claiming actual expenses for the same business. Pick one or the other.
• The income is from a partnership (different rules).
• You're claiming rent-a-room scheme (separate £7,500/year allowance for letting a room in your main home).
• The income is employment income misclassified as self-employed (IR35 territory — HMRC may reassess).

Practical record-keeping

Even if you're under £1,000:

• Keep records of what you sold, when, for how much.
• Keep evidence of source (especially if reselling — receipts of purchase prove you're not invoicing fictional sales).
• Save bank records showing the deposits.
• Print/save platform sale histories annually.

If HMRC nudges you in 5 years asking about an old eBay account, records protect you.

When you cross £1,000 — what to do

1. Register for Self Assessment by 5 October of the following tax year (see Part 2 of our SA series).
2. Track expenses if material — or just plan to use the £1,000 allowance.
3. File Self Assessment by 31 January.
4. Pay tax owed by 31 January (Self Assessment + Class 4 NI if profits over £12,570).
5. Consider whether the activity is now substantial enough to operate as a proper business (separate bank account, accounting software, accountant).

The bigger picture — what Class 4 NI looks like

If your side hustle profits exceed £12,570, you'll also pay Class 4 NI:

• 6% on profits £12,571–£50,270.
• 2% above £50,270.

So a teacher earning £42,000 PAYE + £15,000 side-hustle profit (after expenses) pays:

• Income tax on the £15,000 at higher-rate (since main salary uses basic-rate band) = £6,000.
• Class 4 NI: 6% on £15,000 = £900.
• Total extra tax: £6,900 on £15,000 of side income.

Net keep rate on side income at higher-rate: roughly 54%. Significantly less than the 79% keep rate on basic-rate-band earnings — many side hustlers underestimate this.

Sources

• HMRC: Trading and Property Allowance
• HMRC: Check if you need to send a Self Assessment tax return
• gov.uk: Selling online and paying taxes — information for users of digital platforms
• HMRC: Cryptoassets manual
• HMRC: Badges of Trade