You’ve started earning a little on the side, and then the worry creeps in. Do I need to tell HMRC? Will I owe tax? Have I already done something wrong?

I’ll say it straight: tax is the part of side hustling nobody wants to think about, and it’s easy to put off. But it’s much less scary once you understand one number: £1,000. This post explains what the trading allowance is, how it works in plain English, and what to do if you go over it.

A quick note before we start. I’m a mum, not an accountant, so this is a general guide to help you ask the right questions. The rules can change and your situation might be different, so always check the latest guidance on GOV.UK or speak to a qualified professional.

What is the £1,000 trading allowance?

It’s a tax-free allowance for small amounts of income from things like self-employment, selling things you’ve made or bought to resell, and other side work. If your total side income for the tax year is £1,000 or less, you generally don’t need to tell HMRC or pay tax on it.

Three things trip people up, so they’re worth knowing:

• It’s your income, not your profit. The £1,000 counts what you bring in before you take off any costs. If you sell £900 of products but spent £500 making them, you’ve still brought in £900.
• It’s all your side hustles combined. £600 from one thing and £500 from another is £1,100, which is over the limit.
• It’s per tax year, not per calendar year. The UK tax year runs from 6 April to 5 April.

Your day job doesn’t count towards the £1,000. It only applies to your side income.

What if I go over £1,000?

Then you’ll generally need to register for Self Assessment as a sole trader and send HMRC a tax return. Going over doesn’t mean you’ll pay tax on all of it. You’re taxed on your profit, and you have a choice about how that’s worked out:

• Option 1: take off your real business costs (things like materials, postage, platform fees and software) from your income.
• Option 2: take off the flat £1,000 allowance instead.

You pick whichever leaves you with the lower profit. If your real costs are more than £1,000, Option 1 usually wins. If your costs are tiny, Option 2 might be better. This is exactly why keeping track of your expenses matters.

Key dates to know

• 6 April to 5 April: the tax year.
• 5 October: the deadline to register for Self Assessment if you started trading in the previous tax year and need to.
• 31 January: the deadline to file your online tax return and pay any tax owed for the previous tax year.

Check the current dates on GOV.UK each year, in case anything changes.

Online platforms now report to HMRC

Platforms like Etsy, eBay, Vinted and Fiverr now have to send HMRC information about their sellers. Generally this applies to people with around 30 or more sales, or about €2,000 (roughly £1,700) in a calendar year. It’s not a trap. It simply means HMRC can already see this income, so it’s much better to keep your own records and be upfront.

Is it a hobby or a business?

Selling your own unwanted things, like old clothes you’ve outgrown, is usually fine and tax-free. Making things to sell, or buying things in order to resell them, is different, and may count as trading. HMRC looks at things like whether you do it regularly, whether you’re set up to make a profit, and whether you advertise. If you’re not sure which side you’re on, ask HMRC or an accountant rather than guessing.

It’s also worth knowing that not every type of money you receive counts as trading income. Whether something like a cashback reward or sign-up bonus counts depends on the details, so check the guidance for your own situation.

What I’d do to make this easy

• Keep side hustle money separate. A separate bank account makes everything clearer. It doesn’t have to be fancy.
• Write down every bit of income as it comes in, with the date, where it came from and how much.
• Keep your receipts for anything you spend on the side hustle.
• Check where you are before the tax year ends on 5 April, not in a panic in January.

If you’ve got a foggy brain like mine, you’ll want this written down somewhere, not kept in your head. That’s why I built the free Side Hustle Tracker, which keeps your income and expenses in one place. It comes in the free Side Hustle Starter Kit with the Big Side Hustle Guide.

The bottom line

Under £1,000 a year from side work, you generally don’t need to do anything. Over it, you’ll need to register, file a tax return and pay tax on your profit. None of it is as frightening as it feels, especially if you keep decent records from day one. And if you’re unsure, one conversation with an accountant or HMRC is worth far more than months of worrying.

Want ideas for what to try first? Have a look at my guide to side hustles for mums in the UK, or start on the Start Here page.

I’m not a financial advisor or a tax professional. I’m a mum sharing what I’ve learned along the way. This is general information, not personalised financial or tax advice, and tax rules can change. Always check GOV.UK, do your own research or speak to a qualified professional before making big financial decisions.