MoneyMagpie Editor and financial expert Vicky Parry explains the Trading Allowance and how that means you could earn £1000 tax-free before the new tax year
If you’ve been thinking of starting up a side hustle, now’s the time to do it. No, really – right now.
That’s because you still have until April 5 to claim this current tax year’s Trading Allowance. That means £1,000 tax-free in your pocket (less expenses) before the new tax year starts. It’s a great time to test-drive your side hustle, especially if you want to hard launch a full business in the new tax year, when your allowances will change. Here’s what you need to know…
What is the Trading Allowance?
The Trading Allowance is for small businesses for casual or miscellaneous income up to £1,000 each tax year. This amount does not need to be declared to HMRC and you don’t need to register as a business or sole trader if you earn under £1000 from your side hustles each tax year. It was recently announced that the Trading Allowance is set to go up to £3,000 a year from the 2027/8 tax year, too.
It’s important to know that this £1,000 is earnings or income, including any expenses you had to set up your business such as paying for a website or buying inventory. So, if you took a total of £1,100 but spent £400 on setup costs, you can’t offset those costs against the £1,000 allowance – so you’d need to register with HMRC as you’ve earned over the allowance.
When you need to register with HMRC
If you have – or think you will – earn or turn over more than £1,000 (even if it’s £1,001) in the tax year from casual employment or services like babysitting, you need to register with HMRC. You still might not need to pay tax, depending on the rest of your circumstances, but still need to register.
For example, if you have a part-time PAYE job and earn £10,000 a year, and your side hustle makes £2,000 a year, you’re under the Personal Allowance of £12,750. So, you still wouldn’t pay tax. But, if you have a full-time job earning £30,000 a year and take £2,000 from your side hustle, that £2,000 will be taxed as your total earnings would be £32,000.
How to use the trading allowance before April
If you’re planning to earn under £1,000 from your side hustle this current tax year, just crack on with what you planned to do! There is no need to register with HMRC or declare up to a turnover of £1,000. However, if you have been thinking about setting up a proper side hustle to earn a regular income, now is the time to test-drive it.
You have until April 5 to earn £1,000 under the Trading Allowance, and if you think you want to continue your success into the new tax year you can then register with HMRC for the 2025/26 tax year. There are advantages to registering that are important to know if you think you want to make your side hustle more regular. For example, whereas with the Trading Allowance you can’t offset expenses on profit or register a loss, you can when you are registered as Self Employed and complete a Self Assessment each tax year.
Side hustle start-up tips
Setting up a side hustle doesn’t have to be time-consuming or challenging, but there are some quick tips that will make it easy for you to get earning as soon as possible.
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Do business in an area you’re already familiar with so you can hit the ground running
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Minimise marketing costs by doing it yourself with word of mouth, social media, and Canva for cheap design
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Be realistic about your time commitments and set achievable goals
Keep accurate financial records, too. You might plan to earn under the £1000 allowance, but if your business takes off or you need to prove to HMRC you were right to not register as self employed, these records will help you.
Fast set-up side hustles
If you want to make the most of the Trading Allowance this tax year, consider a side hustle in:
- Reselling thrifted items : scour charity shops, car boot sales, and mis-spelled eBay auctions for bargains. Spruce them up, and sell them on.
- Remote PA work: businesses increasingly need admin support a few hours a week for things like diary management or designing and scheduling social media posts.
- Dropshipping: set up an online shop without needing to buy inventory and sell online through third-party dropshippers.
- Pet sitting : look after pets in your local area if you have a flexible schedule, or become a licensed dog walker for daily income.
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