If you earn money on the side – whether that’s selling online, doing odd jobs, or offering a service – you may not need to register with HMRC or file a tax return.
It depends on how much you earn and where the income comes from. That’s where the trading allowance comes in.
The trading allowance is currently a £1,000 tax exemption. If your total gross trading income is £1,000 or less in the 2026/27 tax year, you usually do not need to tell HMRC, provided none of the exceptions apply.
From 6 April 2027, the allowance will increase to £3,000, following the October 2026 Budget. The £1,000 limit continues to apply until then.
See our Budget 2026 summary for the other changes affecting small businesses.
That threshold applies to your gross income, not your profit.
For example, if you earn £940 selling handmade prints on Etsy during 2026/27, you would normally be within the trading allowance. But if you earn £1,100, even if you spend £300 on supplies, you’ve passed the current threshold and may need to complete a tax return.
Who it applies to
This allowance is intended for individuals earning small amounts from self-employment or what HMRC refers to as “trading income”. It might be from:
- Selling items as part of a trade on platforms such as eBay, Vinted or Etsy
- Casual freelance work, such as writing, photography or tutoring
- Small jobs such as repairs, delivery work or catering
- Other small amounts of income that amount to trading or miscellaneous income
Simply selling your own unwanted possessions does not automatically mean you are trading; it all depends on your personal circumstances.
You can’t use the allowance against trading income from a company or business partnership. It applies to income received by you as an individual.
And if you use the trading allowance, you cannot also deduct actual business expenses against the same income. It is one method or the other.
How it works in practice
If your gross trading income is £1,000 or less for the 2026/27 tax year, you normally won’t need to register for Self Assessment just because of that income.
That doesn’t necessarily mean you can ignore it altogether. You may already need to file a tax return for another reason, and some people choose to register voluntarily – for example, to pay Class 2 National Insurance or to support a claim for certain benefits or reliefs.
The trading allowance applies only to Income Tax. Other systems use their own rules, so income covered by the allowance may still have to be reported for something like Universal Credit.
If your gross trading income goes over £1,000 under the current rules, you normally need to tell HMRC.
If you need to register for Self Assessment, the usual deadline is 5 October following the end of the tax year.
If you exceed the limit during 2026/27, for example, the registration deadline is 5 October 2027.
Once you are within Self Assessment, you can generally choose between:
- Using the £1,000 trading allowance and paying tax on the remaining income without deducting actual expenses
- Ignoring the allowance and calculating your profit using your actual allowable business expenses instead
You can’t do both.
For example, say you earn £2,200 as a part-time tutor and spend £200 on materials and subscriptions.
Under the current rules, if you use the trading allowance, your taxable amount is £1,200.
If you use your actual expenses instead, it is £2,200 minus £200, giving taxable profit of £2,000.
In this case, the trading allowance produces the lower taxable amount.
Read the official guidance here: Tax-free allowances – GOV.UK.
Trading allowance increases to £3,000 from April 2027
The October 2026 Budget confirmed that the tax-free trading allowance will increase from £1,000 to £3,000 on 6 April 2027.
This changes the amount of qualifying trading income an individual can earn before the allowance is exceeded.
For example, the part-time tutor earning £2,200 in the example above would fall within the new £3,000 allowance in 2027/28, assuming the same income and that the full allowance applies.
The increase concerns the tax-free allowance itself, rather than simply the threshold for reporting trading income to HMRC.
The change is set out in the Budget 2026 Red Book.
Keeping records
Even if the trading allowance means you pay no tax on the income, it is still worth keeping a basic record of what came in.
You do not need anything elaborate. Keep enough information to show where the income came from, when you received it, and the amount involved, together with any invoices, bank transactions or records supplied by an online marketplace.
This matters because the allowance is based on gross trading income. If HMRC ever queries whether you were within the allowance, you should be able to show how you arrived at the figure rather than trying to reconstruct it months or years later.
When you might still register below £1,000
There are situations where someone with gross trading income of £1,000 or less may still want or need to register under the current rules.
For example, you may want to:
- Pay voluntary Class 2 National Insurance to protect entitlement to certain benefits
- Claim Tax-Free Childcare based on your self-employed income
- Claim Maternity Allowance based on self-employment
- Declare the income because you already need to complete a Self Assessment return for another reason
But having business expenses above £1,000 does not, by itself, mean you should register. If your qualifying gross income is £1,000 or less and the full trading allowance applies, that income is treated as nil for tax purposes.
Property income is treated differently
If you also receive income from property, a separate £1,000 property allowance may apply.
That can cover things such as letting part of your home, renting out a driveway or receiving other small amounts of property income.
The property allowance is separate from the trading allowance, so someone with both qualifying trading income and qualifying property income can potentially use both allowances in the same tax year.