UK Side Hustle Tax Guide 2025 — Trading Allowance & Self-Assessment

The £1,000 trading allowance

If your gross income from self-employment, casual work, or a side hustle is £1,000 or less in a tax year, it is entirely tax-free and does not need to be reported to HMRC at all. This is gross income — total receipts before any costs — not profit, so someone with £1,500 of sales and £800 of costs (a £700 profit) has still exceeded the £1,000 gross threshold and needs to consider registration, even though their actual profit is below £1,000.

All your side-hustle-type income counts towards the same £1,000, added together — a mix of market-stall sales, online selling, freelance content creation and casual gig work in the same year all count against one combined £1,000 figure, not a separate £1,000 allowance for each activity.

Once you're over £1,000

Exceeding the £1,000 gross threshold generally means you need to register for Self Assessment and report the income, at which point you can choose (like any self-employed person) between deducting the £1,000 trading allowance from your income, or deducting your actual expenses — whichever is more favourable, not both at once.

The line between a hobby and a business

Not every side activity is automatically "trading" for tax purposes. Simply selling your own unwanted possessions — clearing out a wardrobe or garage — is generally not trading income at all, regardless of the amount, because you are disposing of personal items rather than running a business. The distinction turns on whether there is a genuine trading activity (buying to resell, regularly making items for sale, providing a service for payment) rather than occasional personal decluttering — a real distinction HMRC applies, not just a matter of how much money changed hands.

A change coming — but not yet in effect

A simplified reporting route has been proposed for gross trading income between £1,000 and £3,000, removing the need for a full Self Assessment return in favour of a simpler online declaration — but this is planned for the 2027/28 tax year and has not yet taken effect. For now, the ordinary £1,000 threshold and full Self Assessment registration requirement above it still apply exactly as described above.

Worked example

Someone sells handmade crafts online, with total sales of £2,400 for the year and £900 of materials and postage costs (a £1,500 profit).

• Gross income (£2,400) exceeds the £1,000 trading allowance threshold, so registration for Self Assessment is generally required.
• Using actual expenses: taxable profit = £2,400 − £900 = £1,500
• Using the £1,000 trading allowance instead: taxable profit = £2,400 − £1,000 = £1,400

Here, actual expenses (£900) are below the £1,000 flat allowance, so using the trading allowance gives a lower taxable profit (£1,400 vs £1,500) — the opposite of the rental-property case, where genuine costs above £1,000 make itemising the better choice. Which option wins depends entirely on whether your real costs are above or below the flat £1,000 figure.

FAQ

Q: If I sell my old furniture on an online marketplace, do I need to declare it? A: Generally no — selling your own used possessions is not trading income, regardless of the amount, because you are disposing of personal items rather than running a business.

Q: Does the £1,000 threshold apply to profit or to gross income? A: Gross income — total receipts before costs. Someone can be under the £1,000 profit level while still being over it on a gross-income basis, and it's the gross figure that decides whether registration is required.

Q: Has the simplified £1,000-£3,000 reporting route started yet? A: No — it is planned for the 2027/28 tax year and has not yet taken effect; the existing rules described above still apply now.

Sources

Figures verified against HMRC guidance as of 30 July 2026:

• gov.uk / HMRC — Trading allowance guidance (£1,000 gross-income threshold; combined across all trading-type activities; choice between the allowance and actual expenses above the threshold)
• HMRC guidance on hobby vs. trading income (personal-possession disposals distinguished from genuine trading activity)
• Government proposal for simplified reporting of gross trading income £1,000–£3,000, planned from the 2027/28 tax year, not yet in effect