Selling on Etsy, coaching at weekends, a bit of freelance work on the side — at what point does HMRC enter the chat? There is a precise number, and it is £1,000. What catches people out is everything around that number: it is measured on gross income rather than profit, the platforms you sell through already send HMRC your figures, and the two systems run on different calendars.

The trading allowance, precisely

If your total trading income in a tax year (6 April to 5 April) is £1,000 or less, the trading allowance covers it. No registration, no tax return, nothing to declare. Go over £1,000 and you generally need to register for Self Assessment and report the income.

Three details do most of the damage:

  • It is gross income, not profit. Sell £1,400 of handmade candles that cost you £900 in wax, jars and postage and you are over the threshold, despite clearing only £500. The test looks at what came in.
  • It is one allowance per person, not one per side hustle. £700 from Etsy plus £600 from weekend photography is £1,300 of trading income, not two amounts comfortably under the limit.
  • Property income has its own separate £1,000 allowance. Renting out a driveway or a storage room does not eat into your trading allowance.

The platforms already report you — on a different calendar

Since the start of 2024, digital platforms have had to collect seller information and pass it to HMRC. eBay, Etsy, Vinted, Airbnb, Uber, Deliveroo and the freelance marketplaces are all in scope. Reports cover a calendar year and are due to HMRC by the 31 January that follows — the 2024 data went in by 31 January 2025.

You are left out of the report only if both of these are true: fewer than 30 sales of goods in the calendar year and under €2,000 (roughly £1,700) received for them. Both conditions have to be met, and the exemption covers sales of goods only. If you provide a service — design, tutoring, driving, delivery, dog walking — your platform income is reported however small it is.

You should also get your own copy of what was sent. It shows total earnings for the calendar year less the fees, commission and taxes the platform deducted, broken down by quarter.

The calendar mismatch behind the letters. The platform reports January to December. Your tax return covers 6 April to 5 April. So the figure HMRC holds will never match the figure on your return, even when both are correct. Keep your own monthly income record and you can explain the difference in a line, instead of reconstructing a year of sales from memory.

Selling your own belongings is not trading

Clearing the wardrobe on Vinted is not a business, and no amount of platform reporting makes it one. Selling personal possessions you already owned sits outside Income Tax altogether. One exception applies at the top end: a single personal item sold for more than £6,000 can bring Capital Gains Tax into play.

Buying to resell, making to sell, or providing a service is trading. The blurry middle — the occasional flip, the hobby that keeps paying — is judged on the badges of trade: how often you do it, whether you acquired the item intending to sell it at a profit, and how organised and businesslike the whole thing looks.

Allowance or actual expenses: do the sum

Once you are over £1,000 you choose, each tax year, between deducting the flat £1,000 allowance and deducting your actual business costs. You cannot do both, and you can switch from one year to the next.

Worked example — illustrative figures. Priya has a full-time job and sells prints at weekends. In 2026/27 she takes £4,200 gross. Her costs are £1,850 — paper, ink, packaging, postage and platform fees.
Trading allowance route: £4,200 − £1,000 = £3,200 taxable profit.
Actual expenses route: £4,200 − £1,850 = £2,350 taxable profit.
Actual expenses win by £850 of profit. Priya is a basic-rate taxpayer, so at 20% that is £170 of tax saved purely by choosing the right route — and her £2,350 profit sits below the £7,105 at which Class 2 National Insurance is treated as paid, and well below the £12,570 at which Class 4 starts.
Flip the costs and the answer flips with them: a coach with £4,200 of income and £300 of costs is better off with the £1,000 allowance, by £700 of profit.

The rule of thumb is simple. Costs under £1,000 a year: take the allowance and skip the receipt admin. Costs over £1,000: keep the receipts and claim actuals. Anything involving stock, materials or postage almost always lands in the second camp.

What the tax actually costs on side income

Side-hustle profit stacks on top of your employment income, so it is taxed at your top rate rather than from zero. For 2026/27 the personal allowance is £12,570, basic rate 20% runs to £50,270, higher rate 40% to £125,140, and additional rate 45% above that. If your job already uses up the personal allowance, the first pound of side profit is taxed at 20% — or at 40% if the job has taken you past £50,270.

On top of income tax, self-employed profits attract Class 4 National Insurance at 6% between £12,570 and £50,270 of profit, then 2% above. Class 2 is £3.65 a week for 2026/27 and is treated as paid once profits reach £7,105; below that you can pay it voluntarily to protect your State Pension record. Having a job as well does not exempt you from Class 4 on self-employed profit.

Registering is sometimes the good outcome

  • Losses are usable. A genuine new business that spends more than it earns in year one makes a loss — and on the actual-expenses route that loss can often be set against your other income, including PAYE earnings, which produces a refund.
  • Declared income is borrowable income. Undeclared side earnings do nothing for a mortgage application. Our post on making self-employed income legible to a lender covers what underwriters actually read.
  • Retrofitting is worse than starting tidy. Reconstructing three years of records the week the hobby becomes the job is far more painful than a ten-minute monthly habit — our going self-employed guide covers the set-up.

The £3,000 change, and what it does not change

In March 2025 the government announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 gross, with a simpler online service replacing the full tax return for people in that band. It is expected before the end of this Parliament rather than imminently.

Read the word "reporting" carefully. The trading allowance stays at £1,000. Income between £1,000 and £3,000 will still be taxable — what changes is the paperwork route, not the tax. Anyone treating it as a £3,000 tax-free allowance will be wrong by the tax on £2,000.

Your 20-minute check

  1. Add up every pound that came in from the side activity in the tax year — every platform, plus anything paid to you directly. Gross, before fees.
  2. Under £1,000? Nothing to do. Write the number down and move on.
  3. Over £1,000? Register for Self Assessment by 5 October following the end of that tax year — so 5 October 2027 for the 2026/27 year.
  4. Total your costs for the year and compare them against £1,000. That single comparison settles the allowance-versus-actuals decision.
  5. Open a separate account for the side income and move a fifth of every payment into it. It costs nothing and removes the January problem entirely.

If the side income is heading past a few thousand and still climbing, it is worth running properly from the start. Our Solo package covers exactly this from £19 + VAT a month, and our first Self Assessment guide walks through the return itself. Get started when you are ready.