by Asim Abbas
11 November 2026 
Side hustle tax: the £1,000 trading allowance explained
Side hustle tax: the £1,000 trading allowance explained
Dog walking, tutoring, selling crafts, freelance design or a weekend market stall: millions of people now earn money on the side.
- Up to £1,000 of gross trading income a year is tax-free
- Above that, you must register for Self Assessment
- Deduct the £1,000 allowance or actual costs, not both
- Side hustle profit is taxed at your highest rate
The trading allowance means small amounts are tax-free, but once you pass £1,000 you need to tell HMRC.
This guide explains how the allowance works, when to register and how to keep your tax bill down.
How the trading allowance works
The trading allowance covers your total gross income from all self-employed and casual work in a tax year, before expenses.
- £1,000 or less: you don’t need to tell HMRC or pay tax
- More than £1,000: register for Self Assessment and declare it
- You can deduct the £1,000 allowance instead of your actual expenses
There’s a separate £1,000 property allowance for small rental or Airbnb income.
Allowance or actual expenses?
You earn £3,000 from weekend photography. If your costs were £400, deducting the £1,000 allowance is better: you’re taxed on £2,000. If your costs were £1,600, claim actual expenses instead: you’re taxed on £1,400.
Online seller tax calculator
Uses the £1,000 allowance automatically.
How much tax will you pay?
Your side hustle profit is added to your other income. If you already earn a salary over £12,570, the profit is taxed at 20%, or 40% if your total income passes £50,270. Class 4 National Insurance only applies once your self-employed profits exceed £12,570.
| Your salary | Side hustle profit | Tax on side hustle |
|---|---|---|
| £30,000 | £4,000 | £800 |
| £55,000 | £4,000 | £1,600 |
When to register
Register for Self Assessment by 5 October after the end of the tax year in which you passed £1,000. You’ll get a UTR and file your first return by the following 31 January. Register on GOV.UK.
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179When you can’t use the allowance
- Income from a partnership you’re a partner in
- Income from your own company or your employer
- If you claim Rent a Room relief on the same income
Watch the MTD threshold
If your side hustle plus any rental income goes over £20,000 in 2026/27, you’ll need to use Making Tax Digital from April 2028. Our side hustle tax returns service handles small businesses from £150 including VAT.
What should I do next?
Every hustle counts together.
Pick the bigger deduction.
By 5 October after the tax year.
From £150. See the service.
Frequently Asked Questions
Is the trading allowance per business?
No. It’s £1,000 in total across all your trading and casual income in the tax year.
Do I pay National Insurance on a side hustle?
Class 4 only applies to self-employed profits over £12,570. Small side hustles usually only pay Income Tax.
Can I use the trading allowance and the property allowance?
Yes. They’re separate, so you can have up to £1,000 of each tax-free.
What if I didn’t declare side income in past years?
Tell HMRC as soon as you can. Penalties are lower if you come forward before they contact you.
Do I need an accountant for a side hustle?
Not always, but we can file it from £150 including VAT and make sure you use the best allowance.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Stephen Reynold
I’m Stephen Reynold, an accountant at Wingate Accountants. I work with sole traders and small companies, turning tax rules into clear, practical next steps.
