Side income and HMRC, when you must declare it

When side income becomes taxable

1. Under £1,000 of trading income. Covered by the trading allowance, usually with nothing to report.
2. Over £1,000 of trading income. Register for Self Assessment and report the income, claiming the allowance or your expenses, whichever is better.
3. Property income. A separate £1,000 property allowance works the same way, with the Rent a Room scheme for letting a furnished room.
4. Other untaxed income. Interest, dividends and freelance work above the allowances also need reporting.

Why declaring matters

Online platforms now share seller and income data with HMRC, so gaps are increasingly visible. Declaring correctly, and claiming your allowance or expenses, keeps you safe and often means little or no tax on a modest side income. Ignoring it risks penalties and interest later.

The £1,000 that decides everything

The number that matters is the trading allowance, and it is £1,000 of gross income, before you take off a single cost.

Below £1,000 you generally do not need to tell HMRC or register at all. Above it you have a choice each year: deduct the £1,000 allowance instead of your actual expenses, or claim your real costs. If your costs are low, the allowance usually wins. You cannot claim both.

There is a separate £1,000 property allowance for rental income, so someone with a small side trade and a bit of rent could have £2,000 covered.

The £3,000 figure, which is not what people think

You will see £3,000 quoted constantly. It is not in force, and even when it arrives it will not do what most articles claim.

The government announced in March 2025 that the Self Assessment reporting threshold would move to £3,000 gross. No tax year has been set for it. HMRC's own campaign site answers the question directly and says the £3,000 claim is not true, and that if you earn over £1,000 you still need to tell HMRC.

When it does arrive it is a reporting change, not a tax free amount. Tax may still be due on income between £1,000 and £3,000. It would simply be reported through a simpler online service instead of a full return.

What the platforms now send HMRC

Since 1 January 2024, digital platforms have had to report seller information to HMRC, with the first reports filed in January 2025. That covers eBay, Vinted, Etsy, Amazon, Airbnb, Uber, Deliveroo, Fiverr and others.

What they send: your name, address, date of birth, National Insurance number or tax reference, bank account identifier, gross amounts received, fees deducted and the number of transactions. You get a copy of what was sent.

The reporting thresholds are not tax thresholds. A goods seller is left out of the report only if they made fewer than 30 sales in the calendar year and received less than about £1,700. Both conditions have to be met. There is no equivalent exclusion for services or property income.

So you can be under the reporting threshold and still owe tax, or over it and owe nothing. The two things are unrelated, and conflating them is the single most common error in this area.

Selling your own possessions is not a trade

Clearing out a wardrobe and selling on Vinted is not trading, whatever the platform reports. You are disposing of personal possessions, usually at a loss against what you paid.

The only thing to watch is Capital Gains Tax, which can apply where a single item sells for more than £6,000. That catches jewellery, art and collectables, not second hand clothes.

When it does become a trade

HMRC looks at the badges of trade, and no single one decides it. In plain terms, the questions are whether you bought or made the item intending to sell it at a profit, how often you do it, whether you modify goods to make them sellable, how organised the selling is, and how quickly you turn stock over.

Buying job lots to resell is trading. Making candles for a market stall is trading. Selling your old bike is not, even if you sell three of them.

What to do if you should have told them

Come forward. The penalty for failing to notify is a percentage of the tax involved, and if you disclose voluntarily before HMRC contacts you, and within 12 months of the tax being due, it can be reduced to nothing. If HMRC finds you first it starts at 10% and rises from there.

Given the platforms are now handing over the data automatically, waiting to be found is no longer a strategy.

The practical version

Add up your gross side income for the tax year. Under £1,000, relax. Over it, register by 5 October following the end of that tax year, keep a record of what you sold and what it cost you, and decide each year whether the allowance or your actual expenses gives the better answer.

Frequently asked questions