Skip to content 
The HMRC side hustle tax limit change has been in the headlines since March 2025, and many people now think they can earn £3,000 before owing anything. They can’t. The tax-free limit is still £1,000 a year. The £3,000 figure reflects a planned change to who has to file a tax return, but it isn’t live yet.
I’ve side hustled for over a decade, and I’m not a tax adviser, so treat this as general information. Every figure below comes from GOV.UK, HMRC, or MoneyHelper, and I last checked them on 3 October 2026.
The short answer: The trading allowance is still £1,000. The government plans to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000, but HMRC says the new online reporting tool is due by 2029. Until it launches, you tell HMRC about side hustle income once it passes £1,000 in a tax year.
What did the government announce about the side hustle tax limit?
On 11 March 2025, tax minister James Murray announced plans to raise the Income Tax Self Assessment reporting threshold for trading income. It would go from £1,000 to £3,000 of gross income, within this parliament. The GOV.UK press release says the change should benefit around 300,000 taxpayers. It names side hustles such as selling clothes online, dog walking, gardening, driving a taxi and creating content.
The government also estimates that about 90,000 of those people have no tax to pay and no reason to report their trading income at all. The rest will be able to pay any tax they owe through a new online service.
“Gross” is the word to watch. It means your income before you take off any costs. HMRC makes the same point on its Tax Help for Hustles page: the figure is your total income, and it is not the same as profit.
Trading allowance and Self Assessment reporting threshold: what is the difference?
Two different numbers confuse. They do different jobs.
What the £1,000 trading allowance covers
The trading allowance is a tax exemption of up to £1,000 a year. It covers income from self-employment, casual services such as babysitting or gardening, and hiring out personal equipment such as power tools. If your gross income from these is £1,000 or less, you usually do not need to tell HMRC. GOV.UK lists a few exceptions, for example if you want to claim a loss, so read the page if your case is unusual.
You get one allowance in total, not one per side hustle. HMRC gives this example: £800 from content creation plus £500 from selling crafts adds up to £1,300, so you need to tell HMRC.
If your income is above £1,000, you can take off the £1,000 allowance or your real costs. You can’t do both.
What the £3,000 reporting threshold will change
The £3,000 is a reporting threshold. It changes how you tell HMRC about income. It does not change how much is tax-free. Once the new service exists, people with gross trading income between £1,000 and £3,000 should be able to report it online instead of filing a full Self Assessment return. They can still owe tax on profit above the allowance.
| Gross trading income in a tax year | What applies today | What is planned |
|---|---|---|
| Up to £1,000 | Trading allowance. Usually nothing to tell HMRC | No change |
| £1,001 to £3,000 | Register for Self Assessment and file a return | Report through a new online service. Tax can still be due |
| Over £3,000 | Register for Self Assessment and file a return | No change |
The right-hand column is the plan, not today’s rules.
When does the £3,000 side hustle threshold start?
No start date has been confirmed. The March 2025 announcement said “within this parliament”. HMRC’s Tax Help for Hustles page, last updated on 24 September 2026, says a new online reporting tool is on the way by 2029. HMRC says it will update that page when the tool is ready.
HMRC also answers a common claim: that you need to do nothing until you earn £3,000. It says that is not true. If you earn over £1,000 from side hustles, you still need to tell HMRC.
Some websites say the £3,000 limit is already live, or that it starts in April 2027. I could not find either claim on GOV.UK or HMRC pages, so I would not rely on them. Check HMRC’s side hustle guide for updates.
Do I need to tell HMRC about my side hustle income now?
Yes, if your total gross side hustle income for the tax year was over £1,000. The tax year runs from 6 April to 5 April, and the latest one ran from 6 April 2025 to 5 April 2026. HMRC counts all your side hustles together, before costs.
HMRC says side hustle income does not show on your payslip, and it is up to you to tell HMRC, not your employer. The exception is side work that comes with its own payslip, such as evening bar shifts. Tax on that is already handled through PAYE.
Not every sale counts. If you only sell your own unwanted things from time to time, you probably do not need to tell HMRC, and HMRC’s free online checker can confirm that. MoneyHelper explains that buying or making things to sell for a profit is likely to count as trading. That is the line between a clear-out and a side hustle.
The 5 October Self Assessment registration deadline
Here is the date to know right now. If you need to send a tax return for 2025/26 and you have never sent one, you must tell HMRC by 5 October 2026. The same applies if you registered before but did not need a return for 2024/25. You tell HMRC by registering for Self Assessment.
After that, the GOV.UK deadlines page gives two more dates. A paper return must reach HMRC by 11:59pm on 31 October 2026. An online return, and any tax you owe, is due by 11:59pm on 31 January 2027.
If you register after 5 October, HMRC sends you a letter or email with a new filing deadline, three months from the date on it. You must still pay by 31 January 2027. The GOV.UK penalties page says you may get a “failure to notify” penalty if you register late and do not pay your full bill by then. Late returns start with a £100 penalty. If you have missed the date, register as soon as you can.
What if you never told HMRC about income from earlier years? HMRC’s advice is to pay what you owe as soon as you can and to speak to it. If you cannot pay in full, you may be able to set up a payment plan. HMRC explains the steps in its guidance on undeclared income.
A simple example of how the tax works
This is an example, not a real case, and it covers Income Tax only. Say you earn £30,000 in a main job. You also make £2,000 reselling items you bought to sell on, with no costs.
You use the trading allowance, so your taxable profit is £2,000 minus £1,000, which is £1,000. With the standard Personal Allowance, GOV.UK’s Income Tax rates page shows that the 20% basic rate applies to income from £12,571 to £50,270. So the tax on that £1,000 is £200.
Now change the numbers. You make £3,000 and spend £1,800 on allowable costs such as stock and postage. Claiming those costs leaves a £1,200 profit. Using the allowance would leave £2,000. Costs win here, so the tax is £240 instead of £400.
Do online platforms tell HMRC about my sales?
Sometimes, yes. New rules started on 1 January 2024. Under the GOV.UK guidance for sellers on digital platforms, platforms where you sell goods or services, such as eBay, Vinted and Airbnb, collect your details and report your income to HMRC each year, by the following January.
The rules leave out casual sellers of goods who make fewer than 30 sales and receive less than €2,000 (about £1,700) in a calendar year. If you pass either figure, expect your platform to report you.
This is not a new tax. A platform report does not mean you owe tax. Platforms must also send you a copy of what they report, which helps when you fill in your return. If you sell on Vinted, my tips for selling more on Vinted cover the selling side.
Where does Making Tax Digital for Income Tax fit in?
Making Tax Digital (MTD) for Income Tax is a separate change. It started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000.
The limit drops to £30,000 from 6 April 2027, based on your 2025/26 income, and to £20,000 from 6 April 2028, based on 2026/27 income. The GOV.UK page on who needs to use MTD has the full detail.
A side hustle earning £1,000 to £3,000 on its own sits far below those limits. If you also have other self-employed or rental income, check that page, because the figures look at your qualifying income as a whole.
What to do next
- Add up your gross income from every side hustle for 6 April 2025 to 5 April 2026, before costs.
- Compare the total with £1,000. If you only sell your own things and you are unsure, use the HMRC checker.
- If you are over £1,000 and have never filed a return, register for Self Assessment now.
- Keep your records. GOV.UK says you must keep a record of your income even when you use the allowance. Invoices, a spreadsheet of receipts, emails and bank statements all count.
- Set money aside for any tax bill due on 31 January 2027.
Side hustle tax limit: quick answers
Do I need to file a tax return if I earn £2,000 from a side hustle?
Yes, at the moment. Your gross side hustle income is over £1,000, so you register for Self Assessment and file a return. The £3,000 online service is not live yet.
Do I pay tax on the first £3,000 I earn from a side hustle?
The only tax-free amount is the £1,000 trading allowance. The £3,000 will be a reporting threshold, so income between £1,000 and £3,000 can still be taxed.
Can I claim £1,000 for each side hustle?
No. One allowance per tax year covers all your side hustles together.
Does the trading allowance affect Universal Credit?
The allowance is an Income Tax rule. GOV.UK says it does not reduce the income counted for Universal Credit, so check those rules separately.
Have you added up your 2025/26 side hustle income yet? Tell me in the comments. I wrote about why I think earning more deserves attention, and my guide on how to find the right side hustle for you can help you match one to your week. You can also browse my side hustles section, or join the newsletter for deals, side hustle ideas, and money tips.
