Understanding the £1,000 Trading Allowance and Your Obligations
If you earn more than £1,000 from extra work—selling crafts, filming weddings, content creation, etc.—you must register for Self Assessment and declare all your income for the 2025-26 tax year by 5 October 2026. (gov.uk)
Example
- You sell handcrafted jewellery and earn £600. On the side, you sell photos online for £500. Since your combined income is £1,100, you need to register. If you sell £700 jewellery only, stay under the threshold and no declaration is required.
Mid-October deadline: register by 5 October; online filing and tax payment due 31 January 2027. (gov.uk)
Keeping Records, Declaring Income, and Minimising the Risk
- Keep detailed records: invoices, receipts, travel, materials—always separate personal-use expenses from business ones.
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Use HMRC’s “Where is your additional income from?” tool to figure out whether Self Assessment is needed. (gov.uk)
- Include all income in your tax return; not only side hustle profits but interest, dividends, etc.
- You can reduce taxable income using allowable expenses tied to your hustle: materials, equipment, travel, home-office costs when qualifying.
Planning Tips: Before Self Assessment and MTD Take Effect
Self Assessment (2025-26)
- Register by 5 October 2026 if side income crosses £1,000. (gov.uk)
- File online by 31 January 2027, pay any tax due.
Making Tax Digital for Income Tax (MTD for ITSA)
- From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must use MTD: digital records, quarterly updates, and compatible software. (gov.uk)
- This threshold falls to £30,000 in April 2027 and £20,000 in April 2028. (gov.uk)
Practical Advice
- Choose software early; many free or low-cost options are now MTD-compatible.
- Use quarterly updates to ease workload and avoid last-minute scrambling.
- Budget for tax payments early; withholding funds monthly helps avoid cash flow issues.
What Happens If You Miss Deadlines or Don’t Register
- Penalty points may apply under MTD for late submissions. (gov.uk)
- HMRC may impose interest and late payment penalties if tax due isn’t paid by 31 January.
- Incorrect or missing registrations can lead to fines.
Key Takeaways
| Action | Deadline / Requirement |
|---|---|
| Register for Self Assessment if side income + other extra income in 2025-26 > £1,000 | 5 October 2026 |
| Use MTD from 6 April 2026 if self-employed or landlord with income > £50,000 | Already in force from that date |
| Threshold changes downward in 2027 and 2028 | £30,000 (2027), £20,000 (2028) |
Get ahead now: strong record keeping, timely registration, having compatible software and understanding hike thresholds will keep your side hustle tax-compliant and your risk low.