📖 Guide

Do I Need to Pay Tax on Side Income? The £1,000 Trading Allowance Explained

Selling on the side, freelancing evenings and weekends, or renting out a spare room? Whether you owe tax — and whether you even need to tell HMRC — depends on one number: £1,000.

Updated for 2026/27 rates. Information only — not tax or legal advice.

The £1,000 Trading Allowance

HMRC gives everyone a £1,000 tax-free trading allowance per tax year for miscellaneous income from self-employment, side hustles, or casual trading — separate from your employment Personal Allowance. If your gross side income is under £1,000 in a tax year, you generally don't need to declare it or register for Self Assessment at all.

What Counts as "Side Income"?

What If I Earn More Than £1,000?

Once gross side income exceeds £1,000 in a tax year, you must register for Self Assessment and declare it — even if, after deducting expenses, you don't actually owe any tax. You have two options for how to calculate your taxable profit:

  1. Deduct the £1,000 trading allowance from your income (simplest, no need to track individual expenses)
  2. Deduct your actual allowable expenses instead, if they're higher than £1,000

Use whichever gives you the lower taxable profit. See our self-employed tax calculator once you know your profit figure.

Property and Rent-a-Room

Renting out a room in your own home has a separate, more generous Rent a Room Scheme allowance of £7,500 a year tax-free (£3,750 if shared with someone else). Income from a separate rental property uses a different £1,000 property allowance, distinct from the trading allowance above.

Registration deadline: if you need to register for Self Assessment, the deadline is 5 October following the end of the tax year in which you started earning the income. Missing it can trigger a penalty even if no tax is ultimately owed.

Do I Owe Tax Even If I'm Under £1,000?

If your gross side income is under £1,000, you don't need to register or pay tax on it at all — the trading allowance covers it completely, regardless of your other income or tax band.

Related Calculators

Take-Home Pay Calculator
Full salary breakdown
PAYE Calculator
Income Tax & NI breakdown
Required Salary Calculator
Gross needed for a target take-home
Pension Contribution Calculator
Auto-enrolment & salary sacrifice

Check Your Own Numbers

Rules like these are easier to apply once you can see your actual take-home pay, tax and NI broken down.

Open the Take-Home Pay Calculator →
Written using published HMRC guidance and gov.uk rules, current as of 2026/27. Not a substitute for personalised advice — for your specific circumstances, consult gov.uk or a qualified adviser via the FCA Register.

Frequently Asked Questions

Do I need to tell HMRC about side income under £1,000?
No — the £1,000 trading allowance means income under that threshold is tax-free and doesn't need to be declared, regardless of your other earnings.
What happens if I earn £1,500 from a side hustle?
You must register for Self Assessment and declare it. You can deduct the £1,000 trading allowance, leaving £500 taxable, or deduct actual expenses if higher — then pay Income Tax (and Class 2/4 NI if applicable) on the remaining profit.
Does the £1,000 trading allowance apply per side hustle or in total?
In total — it's a single £1,000 allowance covering all your miscellaneous self-employed/trading income combined, not £1,000 per separate activity.
Is rental income covered by the same £1,000 allowance?
No — rental income from letting out a separate property uses its own £1,000 property allowance. Renting a room in your main home instead falls under the more generous £7,500 Rent a Room Scheme.