Side Hustle Making Money? Here's When HMRC Actually Needs to Know

Selling on Vinted, doing freelance work on the side, or renting out equipment — a growing number of people have some form of side income, and a common source of anxiety is not knowing when it needs to be declared. The answer hinges on a specific, often-misunderstood HMRC rule called the trading allowance.

The £1,000 rule

For the 2026/27 tax year, you can earn up to £1,000 in gross income from self-employment or casual trading activity without needing to tell HMRC or pay tax on it, according to the Low Incomes Tax Reform Group. This is your gross income — the total money coming in, before deducting any costs — not your profit, which is an important distinction many people get wrong.

Cross that £1,000 threshold and you generally need to register for Self Assessment, regardless of whether the activity is full-time, part-time, or a genuinely casual sideline, per ByteStart. Registration is required by 5 October in your second tax year of trading — miss that deadline and you risk a penalty even if you owe no tax.

A change on the way

The government has announced plans to raise this reporting threshold from £1,000 to £3,000, meaning people earning below that higher figure would no longer need to register for or submit a Self Assessment return at all. This hasn't taken effect yet, so the current £1,000 threshold still applies for now — don't assume the higher limit already covers you.

One rule you can't combine

If your costs are higher than £1,000, you can choose to deduct your actual business expenses instead of using the trading allowance — but you can't use both. Claim the £1,000 allowance and you give up the right to deduct real costs for that tax year, so it's worth doing the maths if your expenses are significant (for example, buying stock to resell).

Checklist: work out where you stand

1. Add up your gross side-income for the tax year — total money received, not profit after costs.
2. If it's under £1,000, you generally don't need to do anything — no registration, no tax return required for that income.
3. If it's over £1,000, register for Self Assessment via GOV.UK by 5 October in your second year of trading.
4. Decide: trading allowance or actual expenses? Add up genuine costs (materials, postage, platform fees) and compare against the flat £1,000 allowance — claim whichever is higher.
5. Keep basic records regardless of income level — bank statements or a simple spreadsheet of sales and costs, in case HMRC ever asks.
6. Remember "trading" versus "hobby" isn't just about the amount — if HMRC considers what you're doing a genuine business (buying to resell, advertising services, repeat transactions), registration rules can apply even close to or under the threshold in edge cases.
7. Watch for the threshold rising to £3,000 — once confirmed and in force, smaller side hustles will be freed from the registration requirement entirely.

Key Numbers

• Current trading allowance: £1,000 gross income per tax year (LITRG)
• Proposed future reporting threshold: £3,000
• Self Assessment registration deadline: 5 October, second tax year of trading
• Choice: trading allowance or actual expenses — not both

Sources

• Trading allowance — Low Incomes Tax Reform Group
• What is the £1000 trading allowance — how does it work? — ByteStart
• Register for Self Assessment — GOV.UK

Educational content only — not financial advice.