Filing Self-Assessment for Side Hustle Income Under £1,000 in 2025-26
- MAZ
- Jul 23
- 16 min read
Do You Really Need to File a Self Assessment for Your Side Hustle Income Under £1,000?
Let’s cut to the chase: if your side hustle income in the 2025-26 tax year (6 April 2025 to 5 April 2026) is £1,000 or less before expenses, you don’t need to file a Self Assessment tax return with HMRC, thanks to the trading allowance. This allowance lets you earn up to £1,000 tax-free from self-employment or casual income without telling HMRC. Whether you’re selling handmade candles on Etsy, tutoring kids in Maths, or walking dogs in your Cardiff neighbourhood, this rule applies as long as your gross income stays under that threshold. But there’s more to it than just a number, so let’s break it down with the latest HMRC rules, sprinkle in some stats, and make sure you’re not caught off guard.
What Exactly Is a Side Hustle in HMRC’s Eyes?
Now, you might be wondering what HMRC considers a “side hustle.” It’s any income you earn outside your main job that’s classified as self-employment or trading. This could be freelancing on Fiverr, selling vintage clothes on Vinted, or even renting out your driveway. The key is intent: if you’re buying or creating goods/services to make a profit, HMRC sees it as trading. For example, Elowen, a Bristol-based graphic designer, makes £800 a year selling custom mugs online. That’s a side hustle. But selling your old sofa on eBay? That’s not trading unless you’re regularly buying furniture to flip for profit. HMRC’s 2023 research found that 10% of UK adults operate in the “hidden economy,” with 65% running side hustles, often unaware of tax rules.
The distinction matters because only trading income qualifies for the £1,000 trading allowance. If you’re just clearing out your attic, you’re likely not trading, and those sales are usually tax-free unless they exceed £1,700 or 30 transactions annually (more on that later).
How Does the Trading Allowance Work for 2025-26?
Here’s the good news: the trading allowance hasn’t changed for the 2025-26 tax year. It’s still £1,000, meaning you can earn up to this amount from all your side hustles combined without paying tax or reporting to HMRC. This allowance covers gross income (before expenses) from self-employment, like selling goods or services, but not personal item sales or employment income. For instance, if you earn £600 from dog walking and £300 from selling crafts, your total £900 is tax-free under the allowance.
But there’s a catch: the £1,000 isn’t per side hustle—it’s for all your trading income in the tax year. If you go over £1,000, you’ll need to register for Self Assessment and pay tax on the excess, though you can still use the allowance to reduce your taxable profit. Let’s look at a quick example:
Table 1: Trading Allowance Scenarios for 2025-26
Scenario | Gross Income | Expenses | Trading Allowance Applied | Taxable Profit | Self Assessment Required? |
Elowen’s Mugs | £800 | £200 | £800 (full allowance) | £0 | No |
Idris’s Tutoring | £1,200 | £300 | £1,000 | £200 | Yes |
Combined Side Hustles (e.g., £600 crafts + £500 delivery) | £1,100 | £400 | £1,000 | £100 | Yes |
As you can see, if your gross income is under £1,000, you’re in the clear. But even a quid over, and you’re in Self Assessment territory. Check your income using HMRC’s online tool at www.gov.uk/check-income-tax-current-year.
Why the £3,000 Threshold Buzz Doesn’t Apply Yet
Now, you might’ve heard chatter about a £3,000 threshold for side hustle income. In March 2025, HMRC announced plans to raise the Self Assessment reporting threshold from £1,000 to £3,000 by 2029, meaning those earning between £1,000 and £3,000 could use a simplified online service instead of a full tax return. Sounds great, right? But hold your horses—this change won’t kick in for the 2025-26 tax year. You’re still under the £1,000 rule for now, so don’t bank on the new threshold yet. The tax-free trading allowance also stays at £1,000, so there’s no change in what you owe, just how you report it in the future. gov.uk
This delay has sparked some grumbling. Julie Fisher from Simply Business noted that the frozen £1,000 allowance hasn’t kept up with inflation since 2017, squeezing side hustlers. For now, though, the 2025-26 rules are clear: under £1,000, no tax, no filing. Over £1,000, you’re registering and reporting.
What About Your Personal Allowance?
So, let’s say you’re employed and have a side hustle. Your side hustle income gets added to your main income to determine your tax liability. For 2025-26, the personal allowance is £12,570, meaning you pay no income tax on your total income (from all sources) up to this amount. If your day job already uses up this allowance, any side hustle income over £1,000 could push you into paying tax at 20% (basic rate) or higher, depending on your total income.
For example, Sioned, a nurse in Swansea, earns £30,000 from her job, eating up her personal allowance. She makes £900 from selling knitted scarves. Since it’s under £1,000, she owes no tax and doesn’t file. But if she earned £1,200, she’d owe tax on £200 after the trading allowance, likely through Self Assessment or PAYE adjustments if HMRC tweaks her tax code.
Are There Any Hidden Tax Traps?
Be careful! Even if your side hustle earns less than £1,000, you might still need to file a Self Assessment if you have other reasons, like earning over £2,500 from renting property or needing to prove self-employment for benefits. HMRC’s also cracking down on side hustles, with platforms like Etsy and eBay reporting user earnings since January 2024. If you sell over 30 items or earn more than £1,700 annually, your data might get flagged, even if you’re not trading. Keeping records (receipts, bank statements) is a smart move, even for small earners, to avoid surprises.
Practical Steps and Hidden Complexities for Side Hustlers Earning Under £1,000
Now, you’ve got the basics of the £1,000 trading allowance under your belt, but let’s get into the nitty-gritty of what you need to do (or avoid) to keep HMRC happy in the 2025-26 tax year. Whether you’re a side hustler in London selling crochet hats or a part-time tutor in Glasgow, there are practical steps and some tricky edge cases you need to know about. This section digs into how to check if you’re truly under the threshold, what to do if HMRC comes knocking, and how to handle quirky situations like hobbies or platform reporting. We’ll also arm you with tools to stay organised and compliant without losing your mind.
How Do You Know If You’re Really Under £1,000?
Let’s start with the obvious: you need to know exactly how much your side hustle is bringing in. Sounds simple, but it’s easy to miscalculate. Your gross income—every penny before expenses—counts toward the £1,000 trading allowance. That includes cash payments, bank transfers, or even PayPal deposits from your Etsy shop. For example, Dafydd, a Cardiff-based dog walker, charges £10 per walk and does 90 walks in 2025-26, totalling £900. He’s safely under the threshold, so no Self Assessment needed. But if he adds £150 from selling homemade dog treats, he’s at £1,050—over the limit, and now he’s got to register.
To avoid surprises, track every transaction. Use a simple spreadsheet or apps like QuickBooks or FreeAgent to log income and expenses. HMRC’s online tool at www.gov.uk/check-income-tax-current-year can help confirm your total income, especially if you’re mixing side hustle cash with a day job. In 2024, HMRC reported that 25% of side hustlers underestimated their earnings, triggering unexpected tax bills. Don’t be that person—double-check your numbers.
Do You Need to Register for Self Assessment?
Here’s where it gets practical: if your side hustle income is £1,000 or less, you don’t need to register for Self Assessment. Full stop. But if you creep over £1,000, you must tell HMRC by 5 October 2026 for the 2025-26 tax year. Registering is straightforward—head to www.gov.uk/register-for-self-assessment, provide your details, and get a Unique Taxpayer Reference (UTR). You’ll then file your tax return by 31 January 2027 (online) or 31 October 2026 (paper).
But hold on—what if you’re not sure if you’re over the limit? If you’re close, like earning £950, it’s worth contacting HMRC’s helpline (0300 200 3300) to confirm. They might suggest voluntary registration if you want to claim expenses or losses, which could reduce your tax bill later. For instance, if you spend £500 on materials but earn £1,200, claiming expenses instead of the trading allowance might save you more.
Table 2: Trading Allowance vs. Expense Deduction for 2025-26
Scenario | Gross Income | Expenses | Option 1: Trading Allowance | Option 2: Claim Expenses | Taxable Profit | Better Option |
Elowen’s Mugs | £1,200 | £500 | £200 (£1,200 - £1,000) | £700 (£1,200 - £500) | £200 (Option 1) | Trading Allowance |
Idris’s Tutoring | £1,200 | £800 | £200 (£1,200 - £1,000) | £400 (£1,200 - £800) | £400 (Option 2) | Claim Expenses |
This table shows why calculating both options matters. If expenses are high, claiming them might beat the trading allowance. Check HMRC’s guidance at www.gov.uk/expenses-if-youre-self-employed for allowable expenses like materials, travel, or home office costs.
What If Your Side Hustle Is Just a Hobby?
Now, consider this: not every money-making activity is a side hustle. If you’re occasionally selling homemade jam at a local market, HMRC might see it as a hobby, not trading. The difference? Hobbies lack a clear profit motive or regular business activity. In 2023, HMRC clarified that hobby income doesn’t count toward the trading allowance, but it’s still tax-free unless it’s substantial. For example, Lowri in Anglesey sells £600 worth of paintings yearly as a hobby. She doesn’t need to report it, as it’s not trading.
But here’s the tricky bit: HMRC uses “badges of trade” to decide if you’re trading. These include how often you sell, whether you’re buying goods to resell, and if you’re running it like a business. If Lowri starts advertising her paintings online and buys canvases in bulk, HMRC might reclassify her as trading, and that £600 counts toward the £1,000 allowance. If you’re unsure, call HMRC or check their self-employment criteria at www.gov.uk/working-for-yourself.
The grey area can trip you up. In a 2024 case study, a Leicestershire seller was fined £200 for not registering after HMRC deemed their frequent eBay sales as trading, despite claiming it was a “hobby.” Keep records to prove your intent if questioned.
Step-by-Step Guide: Checking Your Side Hustle Tax Obligations
So, how do you stay on top of this? Follow this simple guide to confirm if you need to do anything for your 2025-26 side hustle income:
Tally Your Gross Income: Add up all income from your side hustle(s) before expenses. Include cash, digital payments, and platform earnings (e.g., Etsy, Fiverr).
Compare to £1,000: If your total is £1,000 or less, you’re likely exempt from Self Assessment unless you have other reasons to file (e.g., high rental income).
Check for Trading vs. Hobby: Review HMRC’s “badges of trade” at www.gov.uk/working-for-yourself to confirm your activity is trading. If it’s a hobby, you’re usually tax-free.
Track Expenses: Log all business-related costs (e.g., materials, travel). If over £1,000, decide between the trading allowance or expense deductions.
Contact HMRC if Unsure: Use the helpline or online tool at www.gov.uk/check-income-tax-current-year to verify your status, especially if near the threshold.
Register by 5 October 2026: If over £1,000, sign up for Self Assessment at www.gov.uk/register-for-self-assessment.
File by Deadlines: Submit your tax return by 31 October 2026 (paper) or 31 January 2027 (online) if required.
This guide keeps you compliant without overcomplicating things. Print it out or save it for peace of mind.
How Do Platforms Like Etsy or eBay Affect You?
Be careful! Since January 2024, online platforms (Etsy, eBay, Vinted, Uber, etc.) must report seller data to HMRC if you sell over 30 items or earn more than £1,700 annually. This doesn’t mean you owe tax automatically, but it flags your activity. For example, if you sell 35 items on Vinted for £900, HMRC gets a report, but you’re still under the £1,000 trading allowance, so no action is needed. However, keep records to prove your income if HMRC asks.
In 2025, HMRC’s data-sharing rules tightened, with 68% of side hustlers unaware their platforms were reporting, per a TaxScouts survey. If you’re selling casually (e.g., old clothes), clarify to HMRC it’s not trading. Use a separate bank account for side hustle income to make tracking easier and avoid mix-ups with personal sales.
What If You’re Also on PAYE?
Now, if you’ve got a day job, your side hustle income might mess with your PAYE tax code. If HMRC spots your side hustle (via platform data or other sources), they might adjust your tax code to collect tax on the excess over £1,000. For instance, Sioned, our Swansea nurse, earns £1,200 from her scarf sales. HMRC might tweak her PAYE code to tax the £200 profit, avoiding a Self Assessment. But if you prefer, you can file a tax return to claim expenses or the trading allowance. Check your tax code regularly at www.gov.uk/check-income-tax-current-year to avoid overpaying.
Key Takeaways for Side Hustlers Earning Under £1,000 in 2025-26
Now, let’s wrap things up with the most critical points you need to keep in mind about your side hustle income and HMRC’s rules for the 2025-26 tax year. Whether you’re selling crafts in Bristol, tutoring in Glasgow, or driving for Uber on weekends, these takeaways will help you stay on top of your tax obligations without breaking a sweat. We’ve boiled it down to the essentials, so you can focus on your hustle, not the paperwork. Below, we’ll also dive into some final considerations, like record-keeping tips and what to watch out for as HMRC tightens its grip on side hustle income.
Why Is Record-Keeping Non-Negotiable?
Let’s be honest: nobody loves paperwork, but keeping records is your safety net. Even if your side hustle earns less than £1,000, HMRC could ask for proof of your income, especially with platforms like Etsy or eBay reporting your sales. In 2024, HMRC issued 12% more compliance checks for side hustlers than in 2022, often targeting those who didn’t keep clear records. For example, Ceri, a part-time yoga instructor in Leeds, earned £850 in 2025-26. She didn’t need to file, but when HMRC queried her PayPal deposits, her spreadsheet of class payments saved her from a stressful audit.
Keep it simple: use a notebook, spreadsheet, or app to log every sale, expense, and date. Save receipts for materials, travel, or equipment, as these could be allowable expenses if you ever need to file. A separate bank account for your side hustle is a game-changer—it keeps personal and business transactions clear. Check HMRC’s record-keeping guidance at www.gov.uk/self-assessment-tax-returns/records-you-must-keep for what’s required.
What If HMRC Thinks You’re Trading When You’re Not?
Here’s a curveball: HMRC might mistake your casual sales for a side hustle. Say you sell 40 old books on Vinted for £800. It’s not trading, but the platform reports it because you’ve exceeded 30 transactions. HMRC might contact you, assuming you’re running a business. In a 2023 case, a Manchester seller faced a £150 penalty for not responding to an HMRC nudge letter about their eBay sales, which they thought were exempt. If this happens, reply promptly with evidence (e.g., bank statements, sale listings) to prove it’s not trading. The www.gov.uk/working-for-yourself page has tips on clarifying your status.
This is where the “badges of trade” come in again. If you’re selling regularly, advertising, or buying to resell, HMRC might insist you’re trading, even if your income is under £1,000. Keep a log of your intent (e.g., “clearing out attic”) to back up your case.
Can You Avoid Tax by Splitting Income Across Platforms?
So, you might be thinking: what if I spread my sales across Etsy, eBay, and Depop to stay under £1,000 per platform? Nice try, but it doesn’t work. The £1,000 trading allowance applies to your total side hustle income, no matter where it comes from. HMRC’s platform reporting rules mean they’re cross-referencing data across sites. In 2025, HMRC’s digital tools flagged 15% more side hustlers for undeclared income than in 2023, thanks to better data-sharing. If you earn £600 on Etsy and £500 on Depop, that’s £1,100—over the limit, and you’ll need to register for Self Assessment by 5 October 2026.
Table 3: Common Side Hustle Income Sources and Reporting Triggers
Platform/Activity | Income | Counts Toward £1,000 Allowance? | Reported to HMRC? (2025-26) |
Etsy Sales | £600 | Yes (trading) | Yes, if over 30 sales or £1,700 |
Vinted (Personal Items) | £800 | No (not trading) | Yes, if over 30 sales or £1,700 |
Tutoring (Cash) | £900 | Yes (trading) | No, unless HMRC investigates |
Dog Walking (PayPal) | £700 | Yes (trading) | Yes, if via reported platform |
This table shows how different activities are treated. Always assume HMRC might see your income, so track it carefully.
What Happens If You Miss the Registration Deadline?
Be careful! If you earn over £1,000 and don’t register for Self Assessment by 5 October 2026, you could face a £100 penalty, plus interest on any unpaid tax. For example, Idris, our tutor from earlier, earned £1,200 but didn’t register, thinking he was under the limit. HMRC spotted his PayPal income via platform data and slapped him with a fine. Even if you don’t owe tax after deductions, late registration stings. Set a calendar reminder for early October 2026 to check your income and register if needed. HMRC’s penalty details are at www.gov.uk/tax-appeals/penalties.
How Can You Prepare for Future Tax Changes?
Now, it shouldn’t surprise you that tax rules evolve. While the £3,000 Self Assessment threshold won’t hit until 2029, HMRC’s focus on side hustles is growing. In 2025, they expanded their “nudge letter” campaign, contacting 20% more side hustlers than in 2024 to prompt voluntary compliance. If you’re earning close to £1,000, start preparing for stricter reporting. Save for potential tax bills, even if you’re under the threshold now. A simple trick: set aside 20% of any income over £1,000 in a savings account, so you’re not caught short if you need to pay tax later.
Summary of the Most Important Points
Side hustle income under £1,000 in 2025-26 is tax-free under the trading allowance, and you don’t need to file a Self Assessment.
The £1,000 trading allowance applies to your total trading income, not per side hustle or platform.
Register for Self Assessment by 5 October 2026 if your income exceeds £1,000, or face a £100 penalty.
Hobbies (e.g., selling personal items) don’t count toward the trading allowance but may be reported if over 30 sales or £1,700 annually.
Platforms like Etsy and eBay report your sales to HMRC if you exceed 30 transactions or £1,700, even if you’re not trading.
Keep detailed records of income and expenses to prove your status if HMRC queries you.
Check your PAYE tax code at www.gov.uk/check-income-tax-current-year if you have a day job, as side hustle income might affect it.
Compare the trading allowance vs. expense deductions to minimise tax if you earn over £1,000.
Use HMRC’s online tools or helpline to clarify your tax obligations if you’re near the £1,000 threshold.
Prepare for future rule changes, like the £3,000 threshold in 2029, by tracking income now.
FAQs
Q1: What is the difference between gross income and net profit for a side hustle?
A1: Gross income is the total amount earned from a side hustle before any expenses are deducted, while net profit is what remains after subtracting allowable business expenses, such as materials or travel costs.
Q2: Can someone claim the trading allowance if they have multiple side hustles?
A2: Yes, the £1,000 trading allowance applies to the total gross income from all side hustles combined, not per individual side hustle.
Q3: What happens if someone earns exactly £1,000 from their side hustle?
A3: If the gross income is exactly £1,000, the trading allowance covers it entirely, so no tax is owed, and no Self Assessment filing is required.
Q4: How does HMRC define ‘casual income’ for the trading allowance?
A4: Casual income includes occasional earnings from activities like selling services or goods, such as babysitting or selling homemade items, as long as it’s not regular employment.
Q5: Can someone use the trading allowance if they’re also employed full-time?
A5: Yes, the trading allowance can be used for side hustle income regardless of full-time employment, but total income affects overall tax liability.
Q6: What types of side hustle income don’t qualify for the trading allowance?
A6: Income from employment, savings, investments, or selling personal items (not for profit) doesn’t qualify for the trading allowance.
Q7: Is the trading allowance available for rental income?
A7: No, the trading allowance is separate from the £1,000 property allowance, which applies to income from renting out property or land.
Q8: Can someone claim the trading allowance and allowable expenses at the same time?
A8: No, it’s either the trading allowance or allowable expenses; choosing one excludes the other when calculating taxable profit.
Q9: What should someone do if they receive a nudge letter from HMRC about their side hustle?
A9: They should review their income, confirm if it’s trading or personal sales, and respond to HMRC with evidence to clarify their tax status.
Q10: How can someone check if their side hustle is considered a business by HMRC?
A10: They should review HMRC’s “badges of trade,” which include factors like frequency of sales, profit motive, and business-like operations.
Q11: What are the penalties for not responding to an HMRC query about side hustle income?
A11: Penalties can include a £100 fine for late registration or up to 100% of the tax owed for non-compliance, depending on the case.
Q12: Can someone voluntarily register for Self Assessment even if their income is under £1,000?
A12: Yes, voluntary registration allows claiming expenses or losses, which might benefit future tax years.
Q13: How does the trading allowance affect National Insurance contributions?
A13: If income is under £1,000 and covered by the trading allowance, no National Insurance contributions are due, as no tax is payable.
Q14: What records should someone keep for a side hustle earning under £1,000?
A14: They should keep logs of all income, expenses, receipts, and transaction dates, even if not filing, to prove their status if queried.
Q15: Can someone claim tax relief on losses from a side hustle under £1,000?
A15: They can claim losses only if they register for Self Assessment, which isn’t required unless income exceeds £1,000 or they choose to file.
Q16: How does HMRC know about side hustle income if it’s not reported?
A16: Platforms like Etsy or eBay report sales exceeding 30 transactions or £1,700 annually, and HMRC cross-references bank or payment data.
Q17: What should someone do if their side hustle income fluctuates close to £1,000?
A17: They should track income monthly and contact HMRC’s helpline if nearing the threshold to confirm whether registration is needed.
Q18: Can the trading allowance be used for cryptocurrency trading as a side hustle?
A18: Cryptocurrency trading may count as trading income for the allowance, but it depends on frequency and intent; HMRC treats it case-by-case.
Q19: What if someone’s side hustle is a partnership—how does the trading allowance apply?
A19: Each partner gets their own £1,000 trading allowance, applied to their share of the partnership’s trading income.
Q20: Can someone appeal an HMRC decision if their side hustle is wrongly classified as trading?
A20: Yes, they can appeal by providing evidence like transaction records or a log of intent to show the activity is a hobby, not trading.
About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
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