If you took more than £1,000 before expenses you need to tell HMRC, and on £1,400 of sales the £1,000 trading allowance can bring the tax down to £80.00.
An employee on a £35,000 salary who sold £1,400 of handmade goods in 2026/27, with £300 of costs
| Salary, taxed through PAYE | £35,000.00 |
| Deducting the actual costs | |
|---|---|
| Sales | £1,400.00 |
| Less costs of materials and postage | −£300.00 |
| Taxable profit | £1,100.00 |
| Income tax: £1,100 at 20% | £220.00 |
| Tax to pay | £220.00 |
| Deducting the trading allowance instead | |
| Sales | £1,400.00 |
| Less trading allowance | −£1,000.00 |
| Taxable profit | £400.00 |
| Income tax: £400 at 20% | £80.00 |
| Tax to pay | £80.00 |
Using the allowance costs £140.00 less tax in this example. You pick one method: the allowance or your actual costs.
England. The salary is taxed through PAYE and uses the whole personal allowance. All assumptions and rates
Assumptions and rates
- England. The salary is taxed through PAYE and uses the whole personal allowance.
- The side income is not from their employer, or from a company or partnership they or someone connected to them owns or controls.
- No other untaxed income.
- Trading allowance £1,000, tested on sales before expenses
- Income tax 20% (the profit stays inside the basic rate band)
- No Class 4 National Insurance, because trading profit is below £12,570
What if I took £1,000 or less?
The allowance covers it in full and you may not have to tell HMRC at all. The test is on sales before expenses, so £900 of sales with £200 of costs is under the limit, and £1,100 of sales with £400 of costs is over it.
There are exceptions. If you made a loss you want to use, or you need proof of self-employment for a benefit claim, you would register anyway.
When is the allowance the better choice?
When your real costs are below £1,000. If they are higher, deduct the real costs instead, because the allowance cannot create a loss and cannot be combined with other expenses.
Is selling my old things a side hustle?
Usually not. Clearing out your own possessions is not trading. Buying things to sell on, or making things to sell, is. If you are unsure, the pattern matters: regular sales, a profit motive and items bought for resale all point towards a trade.
Who cannot use the trading allowance?
You cannot use it in a tax year where any of your trading income comes from your employer, from a partnership where you or someone connected to you is a partner, or from a company you or someone connected to you owns or controls.
Does each side income get its own £1,000?
No. The £1,000 covers all your trades together. Two side incomes of £700 each add up to £1,400 of sales, the same as the working above. Rent is different: it has its own separate £1,000 property allowance.
How do I tell HMRC?
Register for Self Assessment by 5 October after the tax year ends. For 2026/27 sales that is 5 October 2027, with the online return and the £80.00 due by 31 January 2028. Do I need to fill in a Self Assessment tax return? sets out the dates.
What this doesn’t cover
- Rental income, which has its own £1,000 property allowance.
- Selling personal possessions at a gain, which can fall under capital gains tax.
- Scottish income tax rates.
- How side income affects Universal Credit or other benefits.
- VAT registration.
Common questions
Sales. HMRC tests it on your gross trading income before any expenses are taken off.
Yes. They are separate allowances, so side income from a trade and a small amount of rent can each have up to £1,000 covered.
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