Applicable period: 6 April 2026 to 5 April 2027. This guide covers individuals with trading or qualifying miscellaneous income. It does not turn every sale, payment or platform report into taxable trading income.
Start with gross receipts, not profit
The £1,000 trading allowance is not a general £1,000 tax-free profit band. It is a relief with a threshold tested against relevant gross income and with exclusions. Profit is what remains after the permitted deduction method has been applied.
For the 2026 to 2027 tax year, test the allowance against total relevant gross receipts before expenses. Do not first subtract platform fees, materials, postage, travel or other costs.
Relevant trading and miscellaneous receipts from all qualifying activities are combined for the allowance test. The £1,000 is not restarted for each app, customer or side activity.
| Total eligible gross income | Starting position |
|---|---|
| £1,000 or less | Full relief may apply. Check exclusions and the reasons a return may still be needed. |
| More than £1,000 | Tell HMRC. Compare actual expenses with partial relief before choosing a calculation method. |
Full relief and partial relief do different jobs
When eligible total gross income is £1,000 or less, full relief can treat the relevant income as nil for Income Tax, but exceptions can still require a return. A person may also choose not to use full relief, for example where normal loss treatment or voluntary Class 2 National Insurance is relevant.
When total relevant gross income exceeds £1,000, partial relief deducts no more than £1,000 instead of actual expenses and capital allowances. Compare that result with the normal profit method. Do not deduct both the allowance and actual costs from the same relevant income.
The allowance cannot create a loss. Actual expenses may give a lower taxable profit, or a supportable loss, when costs are high.
Three examples show why gross income matters
Example 1: gross receipts below the threshold
A tutor receives £700 and spends £250. The threshold test uses £700 gross income, not the £450 normal-method profit. If eligible and no exception applies, full relief can treat the relevant income as nil.
Example 2: actual costs can be better
A maker receives £2,000 and has £1,300 of allowable costs. The normal method gives £700 profit. Partial relief gives £1,000 taxable profit: £2,000 less the £1,000 allowance. On these simplified facts, actual expenses produce the lower figure.
Example 3: activities are added together
A person receives £600 from design work and £550 from tutoring. The combined relevant gross income is £1,150, so it exceeds the £1,000 threshold even though neither activity exceeds it alone.
These examples isolate the allowance choice. They do not calculate a final tax bill, which depends on the person’s other income, reliefs and circumstances.
Check exclusions before using the allowance
The trading allowance does not apply to partnership trading income or to specified income from an employer, a spouse’s or civil partner’s employer, or certain connected companies and partnerships. If any connected-party exclusion may apply, check the detailed HMRC rule rather than using the £1,000 test on its own.
A payment is not labelled by the words “side hustle”
Freelance services, tutoring, commissions, content income, making goods for sale and organised resale can be trading or miscellaneous income, depending on the facts. Employment income, property income and capital disposals have different rules and are not made eligible for this allowance merely because the work was done outside a main job.
Selling personal possessions occasionally does not automatically make the seller a trader; buying or making goods to sell at a profit is more likely to be trading. The tax character must be established before applying the allowance.
Tell HMRC and keep tax-year records where required
Gross trading income above £1,000 must be reported to HMRC, and a new Self Assessment obligation is normally registered by 5 October after the tax year. Use HMRC’s current registration service because the page displays the live deadline for the previous tax year.
A digital-platform report can use a calendar year and show earnings after fees, so it does not replace gross-income records for the 6 April to 5 April tax year. Reconcile the platform statement to customer payments and fees, then include cash and income received away from the platform.
- Record the date, activity, customer or platform and gross receipt.
- Record refunds, fees and each potentially allowable cost separately.
- Add relevant receipts across all activities for the tax year.
- Document any exclusion and the calculation method selected.
- Keep platform reports as supporting evidence, not as a substitute for the tax-year calculation.
Primary sources
- HMRC: Tax-free allowances on property and trading income — allowance, reporting, exclusions and records; allowance applies from 6 April 2017; retrieved 1 September 2026.
- HMRC: Check how to register for Self Assessment — live registration service and current previous-tax-year deadline; retrieved 1 September 2026.
- HMRC Business Income Manual BIM86000 — full relief, partial relief, method choice and loss boundary; updated 4 August 2026; retrieved 1 September 2026.
- HMRC Business Income Manual BIM86007 — relevant income before expenses; updated 4 August 2026; retrieved 1 September 2026.
- HMRC Business Income Manual BIM86010 — combined relevant income across trades and miscellaneous income; updated 4 August 2026; retrieved 1 September 2026.
- HMRC: Selling goods or services on a digital platform — reporting records and trading distinction; platform-reporting rules from 1 January 2024; retrieved 1 September 2026.
UKTaxHero.com is the organisation author and publisher. Sources were independently checked on 1 September 2026. Recheck by 1 December 2026, or sooner if HMRC changes the allowance or registration guidance.