Plenty of people in Mid Sussex earn a little on the side: dog walking, tutoring, selling crafts online, or renting out a driveway near Haywards Heath station. Two tax-free allowances, each worth £1,000 a year, mean a lot of this income never needs to go near HMRC. Once you go over £1,000, though, the rules change, and online platforms now share seller information with HMRC. This guide explains how the allowances work and when you need to tell HMRC.
The short version
- There is a £1,000 trading allowance and a separate £1,000 property allowance each tax year.
- If your gross income from either source is £1,000 or less, you usually do not need to tell HMRC.
- Over £1,000 of trading income, you must register for Self Assessment by 5 October after the end of the tax year.
- Over £1,000 of property income, you must contact HMRC, and over £2,500 you must register for Self Assessment.
- Above £1,000 you choose between deducting the £1,000 allowance or your actual expenses, not both.
What the two allowances cover
The trading allowance covers income from self-employment, casual services such as babysitting or gardening, and hiring out personal equipment. The property allowance covers income from land or property, which includes renting out a parking space or driveway.
Both are tested on gross income, meaning the total amount you receive before any costs are taken off. If you earn £1,200 and spend £300 on materials, your gross income is £1,200, not £900. You can use both allowances in the same tax year if you have both types of income.
If you own a property jointly, each owner gets their own £1,000 property allowance against their share of the gross rental income.
Who cannot use the allowances
The allowances do not apply to income from:
- a company that you, or someone connected to you, owns or controls
- a partnership where you, or someone connected to you, is a partner
- your employer, or your spouse’s or civil partner’s employer
You also cannot use the property allowance on income from letting a room in your own home under the Rent a Room Scheme, or on property income where you claim the tax reducer for finance costs such as mortgage interest.
Allowance or actual expenses: which is better?
If your gross income is over £1,000, you can deduct the £1,000 allowance instead of your real costs. You cannot do both. The rule of thumb is simple: if your genuine expenses are less than £1,000, the allowance usually wins. If they are more, claim expenses.
Worked example: £3,000 of side income
Priya makes and sells candles alongside her employed job. In 2026/27 she takes £3,000.
- With £400 of costs. Claiming actual expenses gives a taxable profit of £2,600. Claiming the trading allowance instead gives £2,000. She should use the allowance and save tax on £600.
- With £1,500 of costs. Actual expenses give a taxable profit of £1,500. The allowance would give £2,000. She should claim her expenses instead.
Either way her gross income is over £1,000, so she must register for Self Assessment by 5 October 2027 and file a return.
Worked example: renting out a parking space
Tom lives near the station and rents his driveway to a commuter for £150 a month, £1,800 a year. He has no real costs. Using the property allowance, his taxable property income is £800.
Because his gross property income is over £1,000 but not over £2,500, HMRC’s guidance says he must contact HMRC rather than register for Self Assessment. If the rent rose above £2,500 a year, he would need to register. The Rent a Room Scheme does not help here, because that is for letting furnished accommodation in your own home.
How the allowances compare
| Trading allowance | Property allowance | |
|---|---|---|
| Annual amount | £1,000 | £1,000 |
| Typical income | Casual services, selling things you make or buy to resell, hiring out equipment | Renting out land, a driveway, a parking space or property |
| Gross income of £1,000 or less | Usually no need to tell HMRC | Usually no need to tell HMRC |
| Gross income over £1,000 | Register for Self Assessment by 5 October | Contact HMRC (over £2,500: register for Self Assessment) |
| Joint owners | Not applicable | Each owner gets £1,000 against their share |
| Main exclusions | Partnership income, income from your employer or a connected company | Rent a Room income, finance cost relief claims, income from your employer or a connected company |
Online platforms now report to HMRC
Since 1 January 2024, digital platforms such as online marketplaces and rental sites have had to collect seller details and report income to HMRC each year. Information for each calendar year is sent by 31 January of the following year. The rules cover selling goods, renting out property, personal services such as freelancing or delivery, and transport hire.
A platform does not have to report you for sales of goods if you make fewer than 30 sales in a calendar year and receive less than 2,000 euros (about £1,700). Platforms must give you a copy of what they report.
Being reported does not automatically mean you owe tax. What matters is whether you are trading.
Trading or just clearing out?
Selling your own unwanted possessions, such as old clothes, toys or furniture, is not usually trading and you probably will not pay Income Tax on it. HMRC treats you as trading if you sell goods you bought intending to sell for a profit, or goods you made, including items you make as a hobby.
Separately, Capital Gains Tax can apply when you sell a personal item, or a set of items such as matching ornaments or books by the same author, worth more than £6,000.
Common mistakes we see
- Testing profit instead of gross income. The £1,000 limit applies to what you take, before costs.
- Claiming the allowance and expenses together. It is one or the other.
- Missing the 5 October deadline to register for Self Assessment, which can lead to a penalty.
- Using the allowance on income from your own company or employer. It is not available.
- Keeping no records. Even when you use the allowance, HMRC expects you to keep a record of your income, such as invoices, spreadsheets or bank statements.
Questions and answers
Can I use both the trading and property allowances in the same year?
Yes. If you have both trading income and property income, you can use £1,000 against each.
I sold old clothes on an online marketplace. Do I owe tax?
Probably not. Selling your own personal possessions is not usually trading. Tax becomes relevant if you buy items to resell for a profit or make items to sell.
My partner and I jointly own the driveway we rent out. Do we share one allowance?
No. Joint owners each get their own £1,000 property allowance against their share of the gross rental income.
Can I use the property allowance if I let a room in my home?
Not on income you receive under the Rent a Room Scheme. That scheme has its own tax-free limit and rules.
Not sure where you stand?
If your side income is creeping past £1,000, or a platform has asked for your National Insurance number, we can tell you whether you need to register and whether the allowance or your actual costs gives the lower tax bill. Book a free, no obligation chat: book a free consultation. Prefer to talk? Call or WhatsApp us on 01444 300981.
If you need a return filed, see our self-employed tax return service in Haywards Heath.
Sources
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Selling goods or services on a digital platform
- GOV.UK: Check if you need to tell HMRC about your income from online platforms
This guide is general information based on the rules for the 2026/27 tax year and is not personal advice. Your own position depends on your full circumstances.