Side hustle tax rules: the £1,000 allowance, platform reporting and Making Tax Digital
When selling online or freelancing becomes taxable, what platforms now tell HMRC, and the digital filing rules from 2026 and 2027
Selling on Vinted, driving for a delivery app, renting out a spare room or doing weekend freelance work all count as income once you pass certain limits. The rules are more forgiving than most people fear, but online platforms now send HMRC a record of what you earn, so ignoring them is riskier than it used to be. This guide sets out the allowances, when you must register and what Making Tax Digital will mean for bigger earners.
Selling your own things is not trading
Clearing out your wardrobe or garage and selling the items online is not a business, however many parcels you post. You bought the items for personal use and are usually selling at a loss. No tax is due and nothing needs reporting, unless a single item sells for more than £6,000, when capital gains tax rules can apply.
Trading starts when you buy or make things to sell, provide a service for money, or sell regularly with the aim of a profit.
The £1,000 trading allowance
The first £1,000 of gross trading income each tax year is tax-free and does not need to be declared. Gross means before any expenses. If you sell £900 of candles that cost you £500 to make, you are under the limit and can ignore it.
Above £1,000 you have two choices:
- Deduct the £1,000 allowance from your income and pay tax on the rest. Simple, and best if your expenses are low.
- Deduct your actual expenses instead. Better if costs are high, and the only way to record a loss.
You cannot do both. Rental income has a separate £1,000 property allowance that works the same way, and Rent a Room relief is a different scheme with a £7,500 limit for lodgers.
When to register and what you pay
Once gross trading income passes £1,000, register for self-assessment at gov.uk by 5 October after the end of that tax year. Income earned in 2026/27 means registering by 5 October 2027 and filing by 31 January 2028.
Profits are added to your other income and taxed at your normal rate, so a side hustle on top of a £40,000 salary is taxed at 20% and a side hustle on top of £55,000 at 40%. Class 4 National Insurance at 6% applies once total self-employed profits exceed £12,570. Class 2 is no longer charged, though low earners can pay it voluntarily to protect State Pension credits.
| Side hustle profit | On a £30,000 salary | On a £60,000 salary |
|---|---|---|
| £2,000 | £400 tax | £800 tax |
| £5,000 | £1,000 tax | £2,000 tax |
| £15,000 | £3,000 tax | £6,000 tax |
Class 4 National Insurance comes on top where profits pass £12,570. If your employment earnings already take you over £50,270 the rate on the side hustle drops to 2%, and HMRC works out the annual maximum for you on the return.
What platforms tell HMRC
Since January 2024, digital platforms such as marketplaces, gig-work apps and short-let sites must collect sellers' details and report annual sales to HMRC. The first reports covered 2024 and were sent in January 2025. You are included if you made 30 or more sales, or took roughly £1,700 (set as €2,000), in a calendar year.
Being reported does not mean you owe tax. It means HMRC can compare the figure with your return, or with the absence of one. If you are a genuine trader over the £1,000 allowance and have not registered, expect a letter.
Making Tax Digital for income tax
From April 2026, sole traders and landlords with combined gross income over £50,000 must keep digital records and send HMRC a summary every quarter through compatible software, followed by a final declaration after the year end. From April 2027 the threshold falls to £30,000. HMRC has said the threshold will fall further after that, so keep an eye on the Autumn Budget.
Below the threshold nothing changes yet, but choosing software early makes the switch easier.
Watch out for
- Counting turnover rather than profit when deciding whether you need to register. The £1,000 test is on turnover.
- Forgetting that the same £1,000 covers all your trades together, not each one separately.
- Ignoring HMRC letters about platform data. Reply, even if you are sure no tax is due.
- Missing the 5 October registration deadline and then the 31 January filing date. Penalties start at £100 regardless of how little tax is owed.