A Guide to the £1,000 Trading Allowance for UK Side Hustles
Understand how the £1,000 trading allowance works for side-hustles and online selling in the UK. Learn when you must register with HMRC and how platforms like eBay report earnings.
Key Takeaways: The £1,000 Trading Allowance
- Applies to gross income: The £1,000 limit is based on total receipts before any expenses are taken off.
- Combined activities count: You receive one single £1,000 allowance across all your side businesses, not one per activity.
- Mutually exclusive with expenses: You cannot claim the flat £1,000 allowance and actual business expenses on the same income.
- Excludes employment income: You cannot use the allowance to shield earnings from your current day job or employer.
Do I need to declare a small side income from selling online?
You do not need to declare a small side income from online selling to HM Revenue and Customs (HMRC) if your total gross trading income remains at or below £1,000 in a single tax year. Under this threshold, your side hustle earnings are entirely exempt from tax.
However, once your total gross receipts from online sales and other trading activities exceed the £1,000 threshold within a tax year, you must register for Self Assessment. You are then required to pay tax on any taxable profit earned.
What is the £1,000 trading allowance?
The trading allowance is a £1,000 tax-free exemption on gross trading income available to UK taxpayers under sections 783AD and 783AE of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005. It simplifies tax administration by removing small-scale, hobbyist side hustles from the scope of Self Assessment.
How do key trading allowance rules apply to my side hustle?
The £1,000 trading allowance applies strictly to your gross trading receipts rather than your net profit.
Gross receipts include your total income before deducting any expenses, shipping fees, or item costs. For example, if you sell handmade crafts and bring in £1,100 but spend £300 on stock, your gross income is £1,100, which means you have crossed the threshold and must register.
Additionally, the allowance is applied collectively across all your personal side hustles. If you sell items on eBay and also provide freelance photography services, you must add these separate income sources together under one single £1,000 limit.
What happens if I go over the £1,000 threshold?
If you exceed the £1,000 threshold, you must register for Self Assessment and declare your income.
The deadline to register for Self Assessment is 5 October following the end of the tax year in which you earned the income. Once registered, you must choose between claiming the flat £1,000 trading allowance or your actual expenses. You cannot use both methods at the same time.
| Calculation Method | How it works | When to choose it |
|---|---|---|
| Claim the trading allowance | Deduct £1,000 flat from your gross income | Best when your actual business expenses are low (under £1,000) |
| Claim actual expenses | Deduct real material and running costs from gross income | Best when your actual business expenses are high (over £1,000) |
Am I selling personal items or trading?
Determining whether you are selling personal items or trading depends on your intent and regular activity.
Selling your own second-hand personal possessions, such as decluttering old clothes or furniture, does not count as trading. This is true regardless of the volume of items, meaning this type of income is usually not taxable and does not count towards the £1,000 trading allowance.
Conversely, buying items specifically to resell at a profit, or regularly manufacturing goods to sell, constitutes trading. For high-value personal goods, Capital Gains Tax can apply if you sell a single asset for a gain that exceeds the annual tax-free allowance of £3,000 for the tax year 2025/26.
How does platform reporting affect online sellers?
Online sellers are now under closer scrutiny because digital marketplaces share sales data directly with HMRC.
Under international tax rules introduced from January 2024, platforms such as Vinted, eBay, Etsy, Depop, and Airbnb must share seller earnings data with the tax authority. This allows HMRC to identify individuals earning above the threshold who have not declared their income, potentially leading to interest charges and tax penalties.
What is changing with the Self Assessment reporting threshold?
In March 2025, the government announced that the Self Assessment reporting threshold for trading income will rise to £3,000 starting in the 2027/28 tax year.
This policy adjustment will remove approximately 300,000 people from the burden of filing full tax returns. Under these upcoming rules, those earning between £1,000 and £3,000 will be permitted to use a simplified online reporting service instead of a traditional Self Assessment return. The tax-free status of the first £1,000 itself will remain unchanged.
Does the £1,000 trading allowance apply to gross income or profit?
The allowance applies strictly to your gross trading income, which represents your total sales receipts before deducting any business expenditures or material costs.
Can I claim the trading allowance and actual business expenses together?
No. You must choose either to deduct the flat £1,000 trading allowance from your gross receipts or to deduct your actual, documented business expenses.
If I have two different side hustles, do I get two separate £1,000 allowances?
No. You receive one £1,000 trading allowance per tax year. It applies to your total combined gross income from all side businesses and platforms.
How does HMRC know if I make over £1,000 selling on online platforms like Vinted or eBay?
Since January 2024, online platforms are legally required to report seller transactions and earnings data directly to HMRC, enabling cross-checks against tax returns.
What is the deadline for registering for Self Assessment if I exceed the trading allowance?
You must register for Self Assessment by 5 October following the end of the tax year in which you exceeded the £1,000 gross income threshold.