How UK tax works for side hustles: the £1,000 trading allowance, when to register for Self Assessment, platform reporting to HMRC, expenses, National Insurance, and record keeping.
Earning extra money from freelancing, selling crafts, delivery work or online services is common. The tax rules are manageable once you know the main thresholds. This guide covers the basics for individuals in the UK; it isn't personal tax advice.
Are you trading, or just selling your things?
Selling your own unwanted possessions, such as old clothes or furniture, is generally not trading, and you usually don't pay Income Tax on it. (Capital Gains Tax can apply to valuable items sold for more than they cost, above certain limits.) Buying items to resell for profit, making things to sell, or providing services for payment usually counts as trading. HMRC looks at factors such as whether you aim to make a profit, how often you sell, and whether you buy goods to sell on.
The £1,000 trading allowance
The trading allowance lets you earn up to £1,000 a year in gross trading income (before expenses) tax-free. If your total trading income is £1,000 or less in a tax year, you generally don't need to tell HMRC or pay tax on it.
If your income is more than £1,000, you can choose either to:
- deduct the £1,000 allowance from your income instead of actual expenses, or
- deduct your actual allowable expenses.
The first option is better if your expenses are low; the second if they exceed £1,000.
Registering for Self Assessment
If your trading income is over £1,000, you usually need to register for Self Assessment and file a tax return. Register by 5 October after the end of the tax year in which you started. Online returns and payment are due by 31 January after the tax year ends. Use GOV.UK's checker if you're unsure.
Platforms now report to HMRC
Since January 2024, online platforms such as marketplaces and gig apps must collect information about sellers and report income to HMRC each year. The first reports covered 2024. For sales of goods, a platform doesn't have to report a seller who makes fewer than 30 sales and earns €2,000 (about £1,700) or less in a calendar year; this exemption doesn't apply to services or rentals. Reporting doesn't create a new tax; it helps HMRC check that people who owe tax are paying it.
Expenses you can claim
If you claim actual expenses, they must be wholly and exclusively for the business. Examples include:
- materials and stock;
- platform and payment fees;
- postage and packaging;
- a share of phone and internet costs used for business;
- simplified flat rates for working from home or using a vehicle.
National Insurance
Self-employed people pay Class 4 National Insurance on profits above the lower profits limit. Class 2 contributions are no longer compulsory, but people with low profits can pay voluntarily to protect State Pension entitlement. Check current rates on GOV.UK.
Making Tax Digital
Making Tax Digital for Income Tax is being phased in for sole traders and landlords. It began in April 2026 for those with qualifying income over £50,000, extends to over £30,000 from April 2027, and to over £20,000 from April 2028. If it applies, you'll need compatible software and quarterly updates.
Practical steps
- Keep a simple spreadsheet of income and expenses from day one.
- Keep receipts (photos are fine) for at least five years after the 31 January filing deadline.
- Consider a separate bank account for side-hustle money.
- Set aside a percentage of profits for tax, such as 20–30% depending on your tax band.
- Check any benefits you receive: extra income can affect Universal Credit and must be reported.
Frequently asked questions
I have a job too. Does that change anything?
Your side-hustle profits are added to your other income, so they are taxed at your highest rate. The trading allowance still applies.
Do I need to register as a business?
You can trade as a sole trader under your own name. Registering for Self Assessment is the key step.
Sources and further reading
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Check if you need to send a Self Assessment tax return
- GOV.UK: Selling goods or services through online platforms
- GOV.UK: Making Tax Digital for Income Tax
Facts checked on 20 October 2026. Spotted an error? Tell us and we will correct it.