Do You Need to Tell HMRC About Your Side Hustle Earnings?

By Al Baker | Updated on the 28th of October 2026

A few delivery shifts, selling things you’ve made or doing some gardening at the weekend can help pay for the food shop or cover a bill. But when do those extra earnings need to be reported to HMRC, and does telling the tax office mean you’ll have a bill to pay? Understanding the trading allowance can help you work out what you need to do before worries about tax put you off earning extra money.

The current trading allowance is £1,000 per tax year, based on qualifying income before expenses across your activities combined. If you qualify and your total stays within that allowance, you generally don’t need to tell HMRC about that income, although exceptions apply. Earning more than £1,000 normally means reporting your trading income, but it doesn’t automatically mean you owe Income Tax.

From the 6th of April 2027, the government has announced that the trading allowance will increase to £3,000, with the Self Assessment trading-income reporting threshold rising alongside it. That gives eligible people more room to earn from small trading activities before exceeding the allowance. Until then, the £1,000 allowance remains in place for the tax year ending on the 5th of April 2027.

This guide explains when to report your extra earnings, how expenses affect your taxable profit and what changes from April 2027. Reporting income and paying tax are separate questions, because your other income and available allowances also affect the amount due. If your circumstances are more complicated, check with HMRC or an accountant before submitting a return.

How much can you earn before telling HMRC?

For the 2026/27 tax year, the trading allowance covers up to £1,000 of eligible trading income before expenses. HMRC’s current trading allowance guidance explains when this income doesn’t need reporting and the exceptions that can still require a return. The allowance is shared across your qualifying activities, rather than being a separate limit for each side hustle.

What changes from April 2027?

The Budget announcement includes an increase in the trading allowance to £3,000. HMRC’s accompanying policy paper confirms that both the allowance and the Self Assessment trading-income reporting threshold are due to rise from the 6th of April 2027. The change is being introduced through the Finance Bill, so it’s an announced future measure rather than an allowance you can use for 2026/27.

The tax year runs from the 6th of April to the 5th of April, rather than January to December. Keep your records organised by the relevant tax year so you apply the correct allowance. Income belonging to this tax year doesn’t get the higher allowance just because you complete the paperwork after April 2027.

Is the allowance based on income or profit?

The starting figure is your qualifying gross income, which means the amount earned before deducting expenses. It isn’t the money left after buying stock, paying delivery costs or covering other business spending. Add together the relevant income from all your qualifying activities rather than treating each app, customer or side hustle separately.

For example, £700 from gardening and £600 from making items to sell would give you £1,300 of gross trading income. That’s above the current £1,000 limit even though neither activity reaches it on its own. The announced £3,000 allowance will also be a combined allowance, rather than £3,000 for every platform you use.

The allowance isn’t a £3,000 payment from the government. It’s tax relief on qualifying income, and it doesn’t mean you’ve made £3,000 profit if you’ve had costs along the way. Someone who receives £3,000 but spends £1,000 doing the work has £2,000 left before considering any other costs.

What happens if you earn more than the allowance?

Going over the limit doesn’t make all your income taxable without any deductions. If you’re eligible, you can normally deduct the trading allowance or your actual allowable expenses when calculating the profit to report. Whether that produces an Income Tax bill then depends on your total income and personal circumstances.

Here’s a current-year example: you receive £1,200 from qualifying trading and choose the £1,000 allowance. That leaves £200 to include in your taxable-profit calculation, rather than a tax bill on the full £1,200. If that £200 falls entirely within a 20% Income Tax band, the Income Tax on it would be £40; if you have enough unused Personal Allowance, there may be no Income Tax due on it.

The same principle will apply with the announced higher allowance. Under that measure, £3,200 of qualifying income minus a £3,000 allowance would leave £200 in the calculation. You would still need to deal with the relevant reporting requirements, and the example doesn’t calculate any National Insurance, student-loan repayments or benefit changes.

Can you use the allowance if you already have a job?

An employed job doesn’t automatically prevent you from using the trading allowance for a separate qualifying activity. Your wages are dealt with separately from that activity’s gross receipts. The tax due on any remaining trading profit will depend partly on how much of your Personal Allowance and tax bands your other income has already used.

The standard Personal Allowance is currently £12,570, although it can be reduced at higher incomes. It isn’t an extra £12,570 for every job or business, and Scottish Income Tax bands differ from those elsewhere in the UK. Don’t assume a colleague with similar side-hustle earnings will have the same tax bill as you.

Not every extra job is self-employment, either. A second job paid through an employer’s payroll normally has tax handled through PAYE, rather than the trading allowance. The work arrangement matters more than whether you call it a side hustle.

Should you claim expenses or use the trading allowance?

You can’t deduct the trading allowance and then claim the same activity’s business expenses on top. Compare the available allowance with your allowable costs before choosing how to calculate your profit. If your expenses are higher, using those costs may produce a lower taxable profit.

Consider a future-year example with £4,000 of trading income and £3,500 of allowable expenses.

The table below uses the announced £3,000 allowance for the tax year starting on the 6th of April 2027. It assumes you’re eligible for the allowance and that all the stated expenses qualify.

Tax relief reduces the profit on which tax is calculated; it doesn’t reimburse every pound you spend. Paying £100 for something you don’t need still leaves you with a business expense, even if part of its cost reduces your tax bill. Focus on what the work earns after its real costs, as well as what can be deducted for tax.

Which side-hustle expenses might qualify?

Allowable costs can include stock bought for resale, materials, business insurance, advertising and the business share of phone or office costs. Depending on the work, there may also be qualifying travel, protective clothing, staff or training costs. HMRC’s self-employed expenses guide explains the conditions for each category.

Personal spending doesn’t become a business expense because you sometimes use the item while working. Where a cost covers both business and private use, you generally need to separate the business portion. Working-from-home costs also need an appropriate calculation rather than a claim for the whole household bill.

Delivery work is a good example of why this matters. My Amazon Flex review covers the mileage, insurance and running costs involved in using my van for deliveries. If you use simplified mileage expenses, you can’t deduct fuel, insurance and the other vehicle costs covered by that rate again; private journeys and fines don’t qualify.

Do you need to report money from selling your old belongings?

Selling clothes you no longer wear or clearing unwanted items out of the loft isn’t automatically trading. Buying goods to resell for a profit or making products to sell is a different situation. The nature of the activity matters, rather than simply the fact that money arrived through eBay, Vinted or another platform.

HMRC’s guidance for people selling through digital platforms also explains that a platform sharing information with HMRC doesn’t automatically mean you owe tax. Platform reporting and your own tax obligations are separate. Valuable possessions can raise other tax questions, so a large sale may need checking even when you aren’t running a trading business.

When do you need to register and report your earnings?

For qualifying trading income above £1,000 in the current tax year, you normally need to register for Self Assessment if you aren’t already registered. Self Assessment is HMRC’s process for reporting income and calculating tax outside the normal payroll system. Use the official additional-income checker if you’re unsure whether your activity needs reporting.

For the tax year from the 6th of April 2026 to the 5th of April 2027, the usual deadline to tell HMRC you need a return is the 5th of October 2027. The standard online filing and payment deadline is the 31st of January 2028, while paper returns are normally due earlier, on the 31st of October 2027. Earlier tax years have their own deadlines, and the new allowance won’t remove an overdue obligation.

Start through HMRC’s Self Assessment registration service and follow the sign-in instructions it gives you. If you’re wondering what is the government gateway?, it’s a sign-in system used by government services. Registering for an account and completing a tax return are separate steps, so don’t stop once you’ve created your login.

Are there exceptions to the trading allowance?

Yes, the allowance doesn’t cover every type of income or business arrangement. Partnership trading income is excluded, and restrictions apply to income from your employer, your spouse or civil partner’s employer, or certain businesses connected to you. Rent, employment wages and company income shouldn’t simply be added to a personal side-hustle allowance.

You may also need to register or submit a return for another reason, even when your trading income falls below the limit. Claiming certain reliefs or benefits based on self-employment can involve additional requirements. Check HMRC’s eligibility and exceptions, and if HMRC has asked you to file a return, don’t ignore it because your earnings are below the allowance; ask whether the filing requirement can be withdrawn.

What if you receive Universal Credit?

The trading allowance is an Income Tax rule, and it doesn’t create an equivalent amount you can leave out of your Universal Credit reporting. Self-employed claimants must report income and expenses for each monthly assessment period, including periods with no income. You can therefore owe no Income Tax and still need to report the earnings for your benefit claim.

Universal Credit also has its own rules on allowable expenses and how earnings affect the award. Depending on your circumstances, an assumed level of earnings called the minimum income floor may apply. Follow the self-employment and Universal Credit guidance and ask through your journal if you need help with your reporting.

Keep records even if you’re below the allowance

One practical habit is to record each payment when it arrives, together with the date and the work it relates to. Keep invoices, platform statements and receipts somewhere you can find them, whether that’s a spreadsheet and organised folders or accounting software. Cash payments count too, so a record based only on bank transfers can miss part of your income.

Even if your qualifying receipts are below the allowance, you need records showing how much you earned. If you submit a self-employed tax return, HMRC normally requires records to be kept for at least five years after the relevant 31st of January filing deadline. Save the supporting paperwork even though you don’t usually send every receipt with the return.

Put money aside if you expect a tax bill

A separate savings pot can help keep money for tax away from everyday spending. Our Chip guide is one place to read about a savings option, but choose an account that lets you access the money when your bill is due. The amount to set aside should reflect your expected profit and tax position, rather than assuming 20% of every payment is right for everyone.

Some people must also make payments on account, which are advance payments towards the following year’s tax bill. They’re normally due on the 31st of January and the 31st of July, with each instalment usually half the previous year’s relevant bill. They generally don’t apply if that bill was below £1,000 or more than 80% of the tax was already paid outside Self Assessment.

That £1,000 test concerns the tax bill, not the trading allowance or your total sales. Your first payment deadline can include both the previous year’s tax and an advance payment towards the next year. Check HMRC’s payments-on-account explanation when estimating what you’ll need.

Don’t let uncertainty about tax decide how much you earn

If the paperwork has been putting you off a side hustle, the announced higher allowance could make a small activity easier to manage from next April. You still need to look at the costs of doing the work and any effect on benefits. But passing a reporting threshold doesn’t mean HMRC takes everything you earn above it, or that earning more is automatically pointless.

For now, keep a total of this tax year’s income and costs, and check the current reporting rules before assuming you’re covered. From the 6th of April 2027, use the higher allowance once the announced measure takes effect. Knowing which rules apply gives you a firmer basis for deciding whether the extra work is worth your time.

Frequently asked questions

When does the £3,000 trading allowance start?

The government has announced that it will start on the 6th of April 2027, for the 2027/28 tax year onwards. The £1,000 allowance still applies to the tax year ending on the 5th of April 2027. The increase is being introduced through the Finance Bill.

Is the trading allowance based on turnover or profit?

It is based on qualifying gross income before expenses, also called turnover for a trading business. Add the relevant income from your activities together. You don’t get a separate allowance for each app or side hustle.

Do I automatically owe tax if I earn more than £1,000?

No. You may need to report current-year trading income above £1,000, but the tax due depends on deductions, other income and available allowances. Reporting income doesn’t automatically produce an Income Tax bill.

Can I claim the trading allowance and expenses?

You can’t deduct the trading allowance and actual business expenses against the same income. Compare the available methods to work out which applies to your circumstances. Where allowable expenses are higher than the allowance, deducting those expenses may produce a lower taxable profit.

Can I use the trading allowance if I have an employed job?

Having an employed job doesn’t automatically stop you using the allowance for a separate qualifying activity. Your wages remain separate from that activity’s receipts. Restrictions apply to certain income, including income from your employer or your spouse or civil partner’s employer.

Do I still report side-hustle income to Universal Credit?

Yes, self-employed Universal Credit claimants must report income and expenses for each monthly assessment period. The trading allowance doesn’t remove that requirement. You can have no Income Tax to pay and still have earnings that affect Universal Credit.

Does selling my old belongings count as trading?

Selling your own unwanted possessions isn’t automatically trading. Buying or making goods to sell at a profit is a different activity. A platform reporting your sales to HMRC doesn’t by itself mean you owe tax.