Trading Allowance 2026: £1,000 Tax-Free Side Hustle Rule
Short answer: the trading allowance lets you earn up to £1,000 a year from a side hustle, before costs, without paying tax or telling HMRC. It’s measured on your sales, not your profit. Go over £1,000 and you must register for Self Assessment, but you can still knock £1,000 off your income instead of claiming expenses. Selling your own unwanted belongings on Vinted or eBay isn’t trading, so it doesn’t count at all.
This guide is for people selling online on the side: Vinted resellers, Etsy makers, eBay flippers, crafters at weekend markets and anyone with a small Shopify store next to a day job. It covers how much you can earn before paying tax in the UK, how the £1,000 trading allowance works alongside a salary, and what changes when HMRC’s platform reporting rules see your sales.
Do you need to tell HMRC? Find your situation
Section titled “Do you need to tell HMRC? Find your situation”| Your situation in the tax year (6 April to 5 April) | Pay tax? | Tell HMRC? |
|---|---|---|
| Selling your own unwanted clothes, books or household items | No, this isn’t trading | No (unless a single item or set sells for £6,000 or more, when Capital Gains Tax may apply) |
| Buying or making things to sell, gross sales of £1,000 or less | No (full relief) | No, but keep records |
| Buying or making things to sell, gross sales over £1,000, costs under £1,000 | Yes, on sales minus £1,000 (partial relief) | Yes, register for Self Assessment by 5 October after the tax year |
| Buying or making things to sell, gross sales over £1,000, costs over £1,000 | Yes, on sales minus your actual expenses | Yes, register for Self Assessment |
| Trading income of any amount from your employer, a partnership or a company you control | Normal rules, no allowance | Yes, the trading allowance doesn’t apply |
| Your platform reported you (30+ sales or about £1,700+ in a calendar year) | Depends on the rows above | Only if the rows above say so |
“Gross sales” means everything customers paid you, including any postage they paid you, before you take off fees, stock or other costs.
What is the £1,000 trading allowance?
Section titled “What is the £1,000 trading allowance?”The trading allowance is a tax-free amount of £1,000 per tax year for income from trading, casual work and other small one-off jobs. It came in on 6 April 2017 and hasn’t changed since. HMRC calls it the “trading and miscellaneous income allowance”, and the rules are in sections 783A to 783AR of the Income Tax (Trading and Other Income) Act 2005, explained in HMRC’s Business Income Manual at BIM86000.
A few things to know straight away:
- It’s one £1,000 per person, not per platform. Vinted, Etsy, a market stall and some dog-walking all share the same £1,000.
- It’s on top of your Personal Allowance. The £12,570 Personal Allowance covers all your income. The £1,000 trading allowance is an extra allowance just for trading income.
- There’s a separate £1,000 property allowance for things like renting out a driveway. You can have both.
- It applies across the UK, including Scotland, even though Scottish Income Tax rates are different.
gov.uk’s tax-free allowances on property and trading income page sets out the basics.
Gross income, not profit
Section titled “Gross income, not profit”This is the part most people get wrong. The £1,000 limit is tested on your gross income: the total amount customers paid you before any costs. It isn’t your profit.
Say you buy £500 of vintage denim and sell it for £1,100. Your profit is £600, but your gross trading income is £1,100. You’re over the £1,000 limit and need to register for Self Assessment, even though you’ve made less than £1,000.
How much can you earn before paying tax in the UK?
Section titled “How much can you earn before paying tax in the UK?”It depends on whether selling is a side income or your main income:
| Your situation | How much you can earn before paying Income Tax |
|---|---|
| Side hustle, and your job already uses your Personal Allowance | £1,000 of gross sales (the trading allowance) |
| Self-employed with no other income | £12,570 of profit (your Personal Allowance), plus the trading allowance or expenses to get from sales to profit |
| Self-employed, profit over £12,570 | Income Tax at 20% and Class 4 National Insurance at 6% on profit above £12,570 in 2026 to 2027 |
Rates for 2026 to 2027 come from gov.uk’s Income Tax rates and self-employed National Insurance rates pages. Scotland has different Income Tax bands. If you’re self-employed with profits of £7,105 or more, Class 2 National Insurance is treated as paid, so your National Insurance record is protected at no cost.
Full relief vs partial relief
Section titled “Full relief vs partial relief”The trading allowance works in one of two ways, depending on whether your gross income is under or over £1,000.
| Full relief | Partial relief | |
|---|---|---|
| When it applies | Gross trading income is £1,000 or less | Gross trading income is over £1,000 |
| What happens | The income is tax-free. You don’t report it | You deduct £1,000 from your income and pay tax on the rest |
| Expenses | Not needed | You can’t also claim expenses or capital allowances |
| Do you need to register? | No (unless you want to, see below) | Yes, Self Assessment |
| Automatic? | Yes | No, you choose it on your tax return |
Full relief: £1,000 or less
Section titled “Full relief: £1,000 or less”If your gross trading income for the tax year is £1,000 or less, it’s simply tax-free. You don’t register, you don’t file a return for it, and if you already file a return for other reasons you leave it off (BIM86011). Keep a note of your sales in case HMRC ever asks, especially if a platform has reported you.
Partial relief: deduct £1,000 instead of expenses
Section titled “Partial relief: deduct £1,000 instead of expenses”If your gross income is over £1,000, you have a choice each tax year (BIM86015):
- Partial relief: taxable profit = gross income − £1,000
- Expenses method: taxable profit = gross income − your actual allowable expenses
You can’t do both. The simple rule: if your allowable expenses are less than £1,000, take the £1,000. If they’re more, claim your expenses. Resellers who buy stock usually have high costs and do better claiming expenses. Makers with cheap materials, or people selling a service, often do better with the allowance.
The allowance can only bring your taxable profit down to zero. It can’t create a loss. If your costs are bigger than your sales, claim your actual expenses so you can record the loss. The allowable expenses guide lists what online sellers can claim.
Worked example: an Etsy maker with £2,400 of sales
Section titled “Worked example: an Etsy maker with £2,400 of sales”Megan makes ceramic planters in Cardiff and sells them on Etsy. She also works part-time in a café, earning £18,000 a year, so her Personal Allowance is already used up by her wages. In the 2026 to 2027 tax year:
- Etsy sales: £2,400 (including postage buyers paid)
- Costs: £900 (clay, glazes, kiln time at a shared studio, packaging, Etsy fees)
| Partial relief (£1,000 allowance) | Expenses method | |
|---|---|---|
| Gross income | £2,400 | £2,400 |
| Less | £1,000 allowance | £900 actual costs |
| Taxable profit | £1,400 | £1,500 |
| Income Tax at 20% | £280 | £300 |
| Class 4 NI (profit under £12,570) | £0 | £0 |
Megan’s costs (£900) are less than £1,000, so the allowance wins by £100 of taxable profit, saving her £20 in tax. If her costs rose to £1,200, the expenses method would win instead: £2,400 − £1,200 = £1,200 taxable, £240 tax.
Because her sales are over £1,000, Megan must register for Self Assessment by 5 October 2027 and file and pay by 31 January 2028. Her bill is under £1,000, so she won’t have to make payments on account. Her profit is below £7,105, so she owes no Class 2 National Insurance either.
Who can’t use the trading allowance?
Section titled “Who can’t use the trading allowance?”HMRC’s manual lists the exclusions at BIM86030. You can’t use the allowance on trading income:
- From a partnership. Profits you earn as a partner in a business don’t qualify.
- From your employer, or your spouse’s or civil partner’s employer. Doing paid extra jobs for the company you work for doesn’t count as a side hustle for this purpose.
- From a company you, or someone connected to you, owns or controls.
- From a partnership you, or someone connected to you, is a partner in.
The catch is that if you have any income in these categories, you lose the trading allowance for that whole tax year, on all your trading income, not just the excluded part. There’s also a narrow rule for people who rent a room to a lodger and choose not to use rent-a-room relief (BIM86034). If that applies to you, check the manual or ask an accountant.
When do you still need to register for Self Assessment?
Section titled “When do you still need to register for Self Assessment?”gov.uk’s who must send a tax return page says you need to file if you were self-employed as a sole trader and earned more than £1,000 before taking off anything you can claim relief on.
| Key date | What’s due (for the 2026 to 2027 tax year) |
|---|---|
| 5 April 2027 | Tax year ends |
| 5 October 2027 | Register for Self Assessment, if you haven’t filed before |
| 31 October 2027 | Paper return deadline |
| 31 January 2028 | Online return deadline and tax payment deadline |
Dates follow the pattern on gov.uk’s Self Assessment deadlines page. Register late and you can be charged a failure to notify penalty. File late and there’s an automatic £100 penalty, even if you owe no tax.
Reasons to register even under £1,000
Section titled “Reasons to register even under £1,000”You might choose to register even if your income is £1,000 or less, so you can:
- claim a loss (for example, a first year with big set-up costs)
- pay voluntary Class 2 National Insurance (£3.65 a week in 2026 to 2027) to build up your State Pension record
- prove you’re self-employed for Tax-Free Childcare or Maternity Allowance
The trading allowance when you also have a job
Section titled “The trading allowance when you also have a job”Most side hustlers already earn a salary. The trading allowance works the same for them: the first £1,000 of side income is tax-free, whatever your salary.
The difference shows up above £1,000. Your salary uses your Personal Allowance first, so any taxable side-hustle profit is taxed at your top rate: 20% if your total income is under £50,270, and 40% above that (outside Scotland).
There’s no Class 4 National Insurance unless your self-employed profit alone is over £12,570. Your salary doesn’t count towards that limit.
Worked example: an employed eBay trainer reseller
Section titled “Worked example: an employed eBay trainer reseller”Daniel is a project manager in Birmingham earning £52,000. At weekends he buys trainers from outlet stores and resells them on eBay. In the 2026 to 2027 tax year:
- Sales: £6,500
- Stock bought: £3,600
- eBay fees, postage and packaging: £600
- Total allowable costs: £4,200
| Trading allowance | Expenses method | |
|---|---|---|
| Gross income | £6,500 | £6,500 |
| Less | £1,000 | £4,200 |
| Taxable profit | £5,500 | £2,300 |
| Income Tax at 40% (his salary is over £50,270) | £2,200 | £920 |
Daniel’s costs are well over £1,000, so claiming expenses saves him £1,280. This is typical for resellers: buying stock means high costs, and the allowance rarely beats them.
Daniel’s £920 bill is under £3,000 and he’s employed, so if he files online by 30 December 2027 HMRC can collect it through his tax code over the following year. Because more than 80% of his total tax is already collected through PAYE, he doesn’t have to make payments on account.
Selling personal possessions isn’t trading
Section titled “Selling personal possessions isn’t trading”Clearing out your wardrobe on Vinted, selling the kids’ old toys on Facebook Marketplace or getting rid of a sofa on eBay isn’t a business. HMRC’s Tax Help for Hustles campaign says that if you’re only selling unwanted personal belongings from time to time, you don’t usually need to tell HMRC. Those sales don’t use up your £1,000 trading allowance either, because they aren’t trading income.
Trading starts when you buy or make things in order to sell them at a profit, and do it regularly. HMRC uses a set of tests called the “badges of trade” to decide. The allowable expenses guide walks through them with seller examples.
The one exception for personal items is Capital Gains Tax. If you sell a single possession, or a set such as matching vases, for £6,000 or more, you may need to work out whether you’ve made a taxable gain (gov.uk: personal possessions). Most second-hand clothes sell for less than they cost, so this rarely affects Vinted sellers.
Worked example: a Vinted seller with £800 of sales
Section titled “Worked example: a Vinted seller with £800 of sales”Priya lives in Manchester. In the 2026 to 2027 tax year she makes £800 on Vinted from 42 sales.
- If all 42 items are clothes from her own wardrobe: this isn’t trading. There’s no tax and nothing to report, however many items she sells.
- If she buys clothes from charity shops to resell: this is trading. But her gross sales of £800 are under £1,000, so full relief applies. No tax, no Self Assessment.
Either way, because she made 30 or more sales in the calendar year, Vinted will report her name and sales total to HMRC. That doesn’t create a tax bill. If HMRC asks, Priya should be able to explain where her items came from, or show her sales were under £1,000.
If she scales up next year and sells £2,500 of charity-shop finds, she’s over £1,000 and must register for Self Assessment. The Vinted tax guide covers that in more detail.
HMRC platform reporting: Vinted, eBay and Etsy
Section titled “HMRC platform reporting: Vinted, eBay and Etsy”Since 1 January 2024, UK digital platforms must collect sellers’ details and earnings and send them to HMRC by 31 January after each calendar year. The first reports went in by 31 January 2025. The rules are on gov.uk’s selling goods or services on a digital platform page.
A platform doesn’t report you if, in a calendar year, you make fewer than 30 sales of goods and receive less than €2,000 (about £1,700). Make 30 sales, or receive about £1,700, and you’ll be reported. The platform must give you a copy of what it sends.
| Platform reporting | Trading allowance | |
|---|---|---|
| What it is | An information rule for platforms | A tax rule for you |
| Measured over | Calendar year (January to December) | Tax year (6 April to 5 April) |
| Limit | 30 sales or about £1,700 | £1,000 of gross trading income |
| Personal items count? | Yes, all sales are reported | No, only trading income |
| Does it mean you owe tax? | No | Above £1,000, yes |
The two limits don’t line up. A wardrobe clear-out with 50 sales gets you reported but isn’t taxable. A reseller with 20 sales of £60 each (£1,200) isn’t reported, but is over the trading allowance and must register. Being under the platform’s reporting line doesn’t make you tax-free.
For platform-specific details, see the guides to Vinted tax, eBay tax and Etsy tax.
Is the trading allowance going up to £3,000?
Section titled “Is the trading allowance going up to £3,000?”No, but the reporting threshold is. On 11 March 2025 the government announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 gross “within this parliament”. HMRC’s spring 2025 tax update is clear that people’s tax bills won’t change.
What it means in practice:
- The £1,000 tax-free trading allowance stays. Income above £1,000 will still be taxable.
- People with trading income between £1,000 and £3,000 will be able to report it through a new, simpler online service instead of a full Self Assessment return.
- HMRC’s Tax Help for Hustles page says the tool is on the way by 2029.
Watch this date: as of 28 October 2026 no start date has been confirmed, so the £1,000 registration rule still applies to 2026 to 2027 income. The Autumn Budget 2026 is today, 28 October 2026. We’ll update this page if it changes the trading allowance or the reporting threshold.
Your side hustle and VAT
Section titled “Your side hustle and VAT”The trading allowance is an Income Tax rule. VAT is separate, and it has a much higher threshold: you only have to register for VAT once your taxable turnover goes over £90,000 in a rolling 12 months. Like the trading allowance, it’s based on sales, not profit, and every channel counts together.
Most side hustles never get close. But a reseller who grows from £1,000 to £50,000 a year can reach £90,000 faster than expected, especially around Christmas. The VAT threshold guide explains the rolling 12-month test, and the threshold monitoring guide shows how to keep track.
Where GoodVat fits
Section titled “Where GoodVat fits”GoodVat doesn’t handle Income Tax. We don’t file Self Assessment returns, work out your trading allowance or submit Making Tax Digital for Income Tax updates. For those, use HMRC’s own services, bookkeeping software or an accountant.
What we do is the VAT side, which matters as your selling grows. The sales that take you past £1,000 are the same sales that, a few years on, can take you past £90,000. GoodVat:
- Tracks your rolling 12-month turnover across Etsy, Shopify, WooCommerce, Amazon and more, and warns you before you reach the VAT threshold
- Works from your exports for channels we don’t connect to directly, such as Vinted (eBay integration is coming soon)
- Registers you for VAT, calculates it correctly on every sale and files your Making Tax Digital VAT returns once you’re registered
What is the £1,000 trading allowance?
Section titled “What is the £1,000 trading allowance?”It’s a tax-free allowance that lets you earn up to £1,000 a year in gross trading income, such as sales from a side hustle, without paying Income Tax on it or telling HMRC. It has applied since 6 April 2017 and is still £1,000 for the 2026 to 2027 tax year. If you earn more than £1,000, you can deduct £1,000 from your income instead of claiming your actual expenses.
Is the trading allowance based on sales or profit?
Section titled “Is the trading allowance based on sales or profit?”Sales. The £1,000 is measured on your gross income, meaning everything your customers paid you before any costs come off. A seller with £1,300 of sales and £600 of costs has made only £700 profit, but is over the £1,000 limit and must register for Self Assessment.
Can I use the trading allowance if I have a full-time job?
Section titled “Can I use the trading allowance if I have a full-time job?”Yes. The trading allowance is separate from your Personal Allowance and from your salary, so an employee can earn up to £1,000 from a side hustle tax-free. The exception is income you get from your own employer, or your spouse’s or civil partner’s employer. If you have any income like that, you can’t use the trading allowance at all for that tax year.
Can I claim expenses and the trading allowance?
Section titled “Can I claim expenses and the trading allowance?”No. Once your income is over £1,000, you choose one or the other each tax year: deduct a flat £1,000 (partial relief), or deduct your actual allowable expenses. If your expenses are more than £1,000, claiming them gives you the lower tax bill. You also can’t claim capital allowances if you use the trading allowance.
Has the trading allowance increased to £3,000?
Section titled “Has the trading allowance increased to £3,000?”No. The government announced in March 2025 that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 within this Parliament. That changes how you report, not what you pay: income over £1,000 will still be taxable. As of 28 October 2026 no start date has been confirmed, and the trading allowance is still £1,000.
Do I need to pay tax on things I sell on Vinted or eBay?
Section titled “Do I need to pay tax on things I sell on Vinted or eBay?”Not if you’re just selling your own unwanted things, like clothes you no longer wear. That isn’t trading, and it doesn’t use up your trading allowance. You only pay Income Tax if you buy or make things to sell for a profit and your sales go over £1,000 in a tax year. A single personal item sold for £6,000 or more may need Capital Gains Tax checking.
Will Vinted or Etsy tell HMRC about my sales?
Section titled “Will Vinted or Etsy tell HMRC about my sales?”They will if you make 30 or more sales, or receive about £1,700 (€2,000) or more, in a calendar year. Since 1 January 2024 UK platforms have had to send HMRC sellers’ details and earnings each year. Being reported doesn’t mean you owe tax. It means HMRC can check the figures against what you’ve declared.
Related guides
Section titled “Related guides”- Allowable expenses for online sellers: what you can claim instead of the £1,000 allowance, and hobby vs business
- Vinted tax UK: HMRC reporting and when Vinted sales become taxable
- eBay tax UK: when eBay selling counts as trading, and what eBay reports to HMRC
- Etsy tax for UK sellers: Income Tax, HMRC reporting and VAT on Etsy fees
- Making Tax Digital for Income Tax: the quarterly reporting rules coming for sellers over £20,000
- Sole trader or limited company?: choosing a structure as your shop grows
- VAT threshold 2026: the £90,000 limit and how the rolling 12-month test works