Side Hustle Tax UK 2026: When to Register for Self Assessment (and What to Declare)

What counts as a side hustle for tax purposes

HMRC distinguishes between selling personal possessions and carrying on a trade. The "badges of trade" are the practical test:

• You bought items with the intention of reselling at a profit.
• Sales are frequent and systematic, not one-off.
• You advertise your services or products.
• You modify or improve goods before selling.
• You operate in a business-like manner — invoices, a separate bank account, social media presence.

Common activities that typically count as trading: Etsy crafts, Uber or delivery driving, dog walking, tutoring, freelance writing or design, reselling on eBay, Vinted or Depop for profit, renting out equipment.

Activities that are not trading: selling your own pre-owned clothes or furniture, disposing of an inherited item, selling a hobby collection at a loss, or occasional babysitting for a friend.

The £1,000 trading allowance in detail

The trading allowance was introduced in April 2017 and covers gross turnover — not profit — up to £1,000 per tax year across all your trading activities combined.

Three ways to use it

Full exemption (turnover ≤ £1,000): You pay no tax and have no obligation to register for Self Assessment. If eBay, Vinted or Etsy report your earnings to HMRC and your total is below £1,000, no action is required.

Partial deduction (turnover £1,001+, low expenses): Register for Self Assessment, then subtract the £1,000 allowance from gross turnover rather than listing individual expenses. This is simpler if your expenses are minimal.

Actual expenses (turnover £1,001+, higher expenses): Instead of the allowance, itemise and deduct your real costs. You cannot use both — pick whichever gives the lower taxable profit.

What you can deduct as allowable expenses

If you choose to itemise expenses rather than use the £1,000 allowance, typical deductions include:

• Materials and stock bought specifically for the business.
• Equipment (laptops, cameras, tools) — either full cost in the year or writing-down allowance.
• Proportion of home broadband based on business use (e.g. 20% if you use it one working day in five from home).
• Software subscriptions and platform fees.
• Phone — business-use proportion only.
• Home office — HMRC flat rate of £6/week, or a proportion of actual household costs.
• Professional fees (accountant, software).
• Mileage for business travel (not commuting) at HMRC approved rates: 45p/mile for the first 10,000 miles.

You cannot deduct: personal clothing, food consumed at home, the cost of building a permanent home studio that becomes a capital asset.

Registration deadlines and penalties

If you exceed £1,000 trading turnover in 2026/27 (tax year ending 5 April 2027):

• Register for Self Assessment by 5 October 2027.
• File your return by 31 January 2028 (online) or 31 October 2027 (paper).
• Pay tax owed by 31 January 2028.

Penalty for late registration: HMRC can charge a failure-to-notify penalty. If HMRC has not already opened an enquiry and you come forward voluntarily, the penalty can be reduced to zero. If HMRC contacts you first, expect a penalty of up to 30% of unpaid tax (or higher if deliberate concealment). An initial £100 fixed penalty applies, then further daily penalties after 3 months.

HMRC DAC7 digital platform reporting

Since 1 January 2024, UK digital platforms must report seller data to HMRC under rules derived from the OECD DAC7 framework. The reporting threshold is sellers with more than 30 sales or earnings above €2,000 (~£1,720) in a calendar year.

Platforms that report include: eBay, Vinted, Etsy, Depop, Amazon Marketplace, Airbnb, Booking.com, Uber, Deliveroo, Just Eat, Fiverr and Upwork.

HMRC receives your name, address, National Insurance number, bank details and total gross earnings. It cross-references this against Self Assessment returns. If you have been earning above £1,000 and not filing, HMRC may send a nudge letter — and acting before they contact you gives the best chance of reduced penalties.

Worked example: Hannah the tutor

Hannah is a secondary school teacher on a salary of £36,000 and tutors GCSE students in the evenings. In 2026/27 she earns £8,000 from tutoring. Her expenses are minimal — £220 on printed revision materials and a proportion of broadband.

Step 1 — Is she trading? Yes. She advertises locally, invoices parents and carries on the activity systematically.

Step 2 — Must she register? Yes. Turnover £8,000 is well above £1,000.

Step 3 — Allowance or actual expenses? Actual expenses (£220) give a higher deduction than the £1,000 allowance? No — the £1,000 allowance is larger than £220, so she uses the £1,000 trading allowance.

Step 4 — Taxable profit: £8,000 − £1,000 = £7,000

Step 5 — Income tax on tutoring profit:

Hannah's salary already uses her personal allowance (£12,570) and is in the basic-rate band. Her £7,000 tutoring profit is added on top of £36,000 = £43,000 total. Still within basic-rate band (up to £50,270). Tax on tutoring profit: £7,000 × 20% = £1,400.

Step 6 — National Insurance:

• Hannah's salary profits exceed £12,570, but Class 4 NI compares all self-employed profits against the threshold.
• Her tutoring profit of £7,000 is below £12,570 so Class 4 NI = £0.
• Class 2 NI also only applies if self-employed profits exceed £12,570 — Class 2 NI = £0.

Total extra tax from tutoring: £1,400. Hannah keeps £6,600 of the £8,000 — an 82.5% keep rate.

Now if Hannah scales up to £18,000 in tutoring income:

• Taxable profit: £18,000 − £1,000 = £17,000
• Income tax: £17,000 × 20% = £3,400 (still basic-rate for her combined income)
• Class 4 NI: 6% × (£17,000 − £12,570) = 6% × £4,430 = £265.80
• Class 2 NI: £179.40 (flat rate for 2026/27)
• Total: £3,845.20

Worked example: Tom the eBay seller

Tom clears out his house and lists old electronics, games and books on eBay. Over 2026/27 he receives £1,200 in total.

Is this trading? Probably not. Tom is selling personal possessions — items he purchased for personal use and no longer needs. He is not buying to resell; he is not making a profit over original cost in most cases.

Tax position: Selling personal possessions (chattels) is a capital disposal, not trading. Personal possessions worth less than £6,000 each are exempt from Capital Gains Tax. Since Tom's items are each worth well below £6,000 and he is not systematically reselling, no tax applies regardless of the £1,200 total.

Even if some items were marginally "trading", the £1,000 allowance would cover the first £1,000 and only £200 would be taxable profit — at which point expenses would likely eliminate it.

Conclusion: Tom does not need to register for Self Assessment.

National Insurance rates for self-employed in 2026/27

Both classes are collected via your Self Assessment return — you don't pay them separately.

If your employed salary already exceeds £50,270, your employer will have deducted Class 1 NI at the upper rate. HMRC will reconcile Class 4 NI against your total NI paid to avoid double-charging you above the upper earnings limit.

Where to register and how

1. Go to gov.uk/register-for-self-assessment.
2. Create or use your HMRC online account (Government Gateway).
3. Select "I need to file a Self Assessment tax return because I'm self-employed or have other income."
4. You will receive your Unique Taxpayer Reference (UTR) within 10 days.
5. Register with HMRC online services using the UTR.

Keep records for 5 years after the 31 January filing deadline — HMRC can open enquiries up to that point (longer for serious error or fraud).

Sources

• HMRC: Trading and Property Allowance
• HMRC: Register for Self Assessment
• HMRC: Selling online and paying taxes
• HMRC: Badges of trade
• gov.uk: Self-employed National Insurance rates