Trading Allowance 2026/27: £1,000 Side-Hustle Tax Guide

Updated for 2026/27. The trading allowance can exempt up to £1,000 of qualifying gross trading and miscellaneous income in a tax year. It is a single allowance per person—not £1,000 for every side hustle—and it has connected-party and partnership exclusions.

Full relief when gross income is £1,000 or less

If total qualifying gross income from all relevant trades and miscellaneous activities is no more than £1,000, full relief can make that income tax-free. You may not need to register for Self Assessment solely because of it, although other income, losses or a notice to file can still require a return.

The test uses gross receipts before platform fees, materials, travel or other expenses. A seller receiving £1,200 through a marketplace cannot reduce the gross-income test to £900 by deducting £300 of fees.

Partial relief above £1,000

Where gross qualifying income exceeds £1,000, you can elect to deduct the £1,000 allowance instead of actual allowable expenses. Compare both methods:

• Actual expenses: taxable profit equals income less allowable costs and capital allowances
• Trading allowance: taxable profit broadly equals qualifying gross income less £1,000

You cannot deduct the trading allowance and actual expenses against the same income. Actual expenses usually produce a better result when eligible costs exceed £1,000 or create a useful loss.

One allowance across multiple activities

If you have freelance income, online sales and casual consultancy, the £1,000 total is shared across them. You may allocate partial relief between eligible sources, subject to the rules, but the combined claim cannot exceed £1,000.

Who cannot use the allowance?

Restrictions can apply where income is received from:

• A partnership of which you are or were a partner
• A close company that you or a connected person owns or controls
• An employer or the employer of a spouse or civil partner in specified circumstances
• Activities covered by another statutory exclusion

The allowance cannot be used to turn employment pay into tax-free freelance income. Check connected-party arrangements carefully.

Selling online

Selling unwanted personal belongings is not automatically a trade. HMRC considers intention, frequency, organisation, improvements, how goods were acquired and profit motive. Buying items specifically to resell, manufacturing products or providing regular services is more likely to be trading.

Digital platforms may report seller information to HMRC. Platform reporting does not create a new tax, change the £1,000 test or replace your records and filing responsibilities.

Property allowance is separate

A separate £1,000 property allowance can apply to qualifying property income. It has its own exclusions and cannot always be used with finance costs or connected-party arrangements. Do not combine rent with trading receipts when testing the trading allowance.

Trading allowance and losses

Using full or partial relief generally prevents an expense-based loss for the same activity. If start-up costs exceed income, registering and claiming actual expenses may preserve a trading loss for relief under the relevant rules. The best choice depends on current and future income.

National Insurance

Where full relief removes the need to report a small trade, the activity may not create a qualifying National Insurance year. A person with low profits should separately check Class 2 voluntary contributions, credits and their State Pension record. The 2026/27 small profits threshold is £7,105.

Universal Credit and other purposes

Taxable profit under the trading allowance is not necessarily the income figure used for Universal Credit, student finance, mortgages or other tests. Keep complete income and expense records even where the tax allowance removes the Self Assessment liability.

Examples

Gross income below £1,000

Ben earns £850 from occasional design work and has £120 of costs. If the income qualifies, full relief can exempt the £850. Ben cannot additionally claim the £120 expenses, but may have no filing requirement solely for that activity.

Gross income above £1,000

Farah receives £3,200 and incurs £650 of allowable expenses. Actual-expense profit is £2,550. Using the allowance gives profit of £2,200, so the allowance is better by £350, assuming no exclusion and no other trade uses it.

Expenses exceed the allowance

Owen receives £5,000 and has £2,400 of allowable costs. Actual-expense profit is £2,600, compared with £4,000 using the allowance. Actual expenses are therefore better.

Records to keep

• Gross receipts before platform and payment fees
• Invoices, sales reports and bank statements
• Actual expenses, even when comparing with the allowance
• Details of connected customers and employers
• The calculation supporting full or partial relief
• Evidence showing whether online sales were trading or personal disposals

2026/27 deadlines

If gross trading income exceeds £1,000 and you need Self Assessment, notify HMRC by 5 October 2027 if not already registered. The usual online filing and payment deadline is 31 January 2028.

Decision checklist

1. Add gross qualifying income across all activities.
2. Check exclusions and connected parties.
3. Separate property income.
4. Compare £1,000 relief with actual expenses and losses.
5. Consider National Insurance and non-tax reporting needs.
6. Keep the calculation and submit any required return.

See HMRC’s official trading and property allowance guidance and additional-income checker. Our self-employed filing guide explains the registration test.

Frequently asked questions

Is the allowance based on profit?

No. The £1,000 filing test and full relief use qualifying gross income before expenses.

Can I claim £1,000 for each trade?

No. It is one personal allowance shared across eligible trading and miscellaneous sources.

Must I claim it?

No. You can use actual expenses where that produces a better or otherwise preferred result.

This guide is general information. Connected-party and loss claims require careful review.