“It’s only a bit on the side. Do I even need to tell HMRC?”
I get asked this a lot, usually a little nervously. Someone’s selling things they make, doing weekend jobs or tutoring in the evenings. It doesn’t feel like “a business”. But the tax rules don’t go by how it feels.
There’s good news on the way. At the Budget on 28 October, the government announced that the trading allowance will rise from £1,000 to £3,000 from 6 April 2027. Here’s what that means, and what it doesn’t change yet.
What is the trading allowance?
The trading allowance is a tax-free amount for people with small amounts of trading income: things like selling goods or services, casual jobs, or hiring out your own equipment.
At the moment it’s £1,000 a year. If your gross trading income in a tax year is £1,000 or less, you generally don’t need to tell HMRC about it or pay tax on it (unless you have to file a tax return for another reason).
The word that catches people out is gross. It means everything you took in, before any costs. So if you sold £1,400 of candles and spent £600 on wax and jars, your gross income is £1,400, not £800. You’re over the £1,000 limit.
What’s changing in April 2027
From 6 April 2027 (the 2027 to 2028 tax year), the allowance is due to rise to £3,000. The level at which this income has to be reported through Self Assessment rises to £3,000 at the same time.
Two things worth knowing:
- It isn’t here yet. The £1,000 limit still applies to the 2025 to 2026 tax year (the return due online by 31 January 2027) and to the current 2026 to 2027 tax year. The change is being made through the Finance Bill.
- It’s aimed at small side income, not established businesses. If your business turns over tens of thousands, this change won’t make much difference to you.
Over the limit? You have a choice
If your gross trading income is over the allowance, you need to register for Self Assessment. The deadline is 5 October after the end of the tax year. For 2025 to 2026, that date has just passed, so if you should have registered and haven’t, do it as soon as you can rather than waiting.
When you file, you can either deduct the allowance from your income or deduct your actual business expenses. You can’t do both. So it’s worth working out which leaves you with the lower taxable figure.
Here’s an illustrative example (not a real client). Sam sells handmade cards online. In a year, Sam takes £1,800 and spends £600 on card, ink and postage. Sam could claim the £600 of expenses (taxable £1,200) or the £1,000 allowance instead (taxable £800). Under the current rules Sam has to register and file either way. From April 2027, on the same figures, Sam would be under the new £3,000 limit.
The allowance can’t be used for income from a company or partnership you (or someone connected to you) own or control, or from your employer. If any of that applies, check the GOV.UK guidance or ask your accountant.
What to do now
Whether you’re well under the limit or creeping past it, the practical steps are the same:
Record every sale and every cost. A notes app or a basic spreadsheet is fine. Without it, you can’t tell whether you’re over the limit, or whether the allowance or your expenses is the better claim.
Keep the side money separate if you can. A second bank account makes it much easier to see what’s actually coming in and going out.
Put something aside if you’re over. If tax is likely to be due, a separate pot helps. It doesn’t guarantee you’ll have enough, so leave it untouched, check it regularly, and ask your accountant what percentage makes sense for you.
When the side hustle starts to grow
For a lot of people, a bit on the side is where a proper business begins. And the question changes from “do I need to tell HMRC?” to “where is all this money going?”
That’s what the Clarity stage of the Sunnyside Profit System is for. It’s the first month, and it starts with your real figures from your accounting software: where last year’s money really went and what each type of sale leaves behind. You come out of it with a clear picture of your money, your starting percentages and your first allocation.
Tax returns aren’t part of the Sunnyside Profit System; that’s separate work. But knowing what you earn and what you’ll owe is where everything else starts. What we’re aiming for is that feeling of “I finally know where it goes”.
You can see how all four stages fit together on our Sunnyside Profit System page.
Not sure where you stand?
If you’re not sure whether you need to register or file, or you’ve realised you should have done it already, book a free call and we’ll work it out together. I’m based in Bromham, near Chippenham, Wiltshire, and work with business owners online across England and Wales.
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This is general information, not advice for your situation. Every business is different, so check with your accountant before acting on it.
