Frequently asked
Side-hustle thresholds, CIS deductions, MTD ITSA, late penalties, home-office expenses. Written for sole traders by people who file their own returns.
Side hustles & marketplaces
Only if your gross sales (before fees) exceed £1,000 in a tax year, OR if you're trading rather than clearing out your wardrobe. HMRC's reporting deal with Vinted, eBay, Etsy, Depop and Airbnb (effective from January 2025) means platforms now share seller data automatically. If you've sold items you bought specifically to resell, you're trading — register for Self Assessment by 5 October following the tax year you started.
The trading allowance lets you earn up to £1,000 of self-employed or casual income each tax year without paying tax or even telling HMRC. If your gross income is below £1,000, you're done — no return needed. Above £1,000, you choose: deduct your actual expenses, OR claim the £1,000 allowance instead of expenses (but not both). Most low-cost side hustles are better off with the £1,000 flat allowance.
Probably yes, but how much depends on your other income. The £2,000 is added to your total taxable income for the year. If your day-job salary already uses your £12,570 Personal Allowance, the £2,000 is taxed at your marginal rate (likely 20% basic, possibly 40% if you're a higher-rate earner). After deducting either your real expenses or the £1,000 trading allowance, you'll typically owe between £200 and £400.
If you're making things to sell with the intent to profit, HMRC treats it as trading — not a hobby — regardless of how casual it feels. The £1,000 trading allowance still applies, so genuinely tiny Etsy stores fall below the threshold. Above £1,000 gross, register for Self Assessment. Materials, postage, listing fees and a portion of your home electricity all count as deductible expenses.
HMRC uses the 'badges of trade' — profit motive, frequency of sales, how you source goods, how you market them, and how long you hold inventory. Selling old clothes from your wardrobe is not trading. Buying clothes to resell, even occasionally, is. If in doubt, the £1,000 allowance is your safety net: under £1,000 gross, you have no obligation to register or report regardless of intent.
No — all gig-economy platform income is treated as self-employment by HMRC. You're a sole trader providing services. Register for Self Assessment, declare gross earnings, and deduct allowable expenses (mileage at 45p/25p per mile, phone bill apportioned, insurance, vehicle costs). Platforms share earnings data with HMRC automatically, so under-reporting is high risk.
CIS subcontractors
Contractors deduct 20% from your invoice if you're registered with HMRC under CIS. If you're not registered, they must deduct 30%. Both rates are deductions on account of your eventual tax bill — they're not the final amount you owe. To register, complete form CWF1 (sole traders) or apply online via your Government Gateway account. Most subcontractors recover a chunk of these deductions when they file Self Assessment, because the 20% rate ignores expenses.
You don't claim them back separately — they're settled when you file Self Assessment. List your gross CIS income on the SA103S/F (self-employment) pages, claim your expenses, and enter the total CIS tax already deducted. HMRC offsets it against your tax bill; if you've overpaid (very common for subbies with vehicle, tool and materials costs), you get a refund. Most CIS subcontractors are owed money back at year-end.
Tools and small equipment, vehicle costs (mileage at 45p/25p per mile or actual fuel + apportioned running costs), PPE, work boots, training that maintains existing skills, public liability insurance, accountant fees, mobile phone (work portion), van lease/HP interest, and a use-of-home-as-office allowance if you do paperwork at home. Capital allowances apply to bigger purchases like vans and power tools.
Yes, but you need to pass three HMRC tests: business test (run a construction business in the UK), turnover test (£30,000+ in construction labour over 12 months — excluding materials and VAT), and compliance test (paid your tax and filed returns on time for the past 12 months). Apply via form CIS302. Gross status means contractors pay you the full invoice without deducting tax — much better cashflow.
MTD ITSA
If your gross self-employment + property income is over £50,000, MTD ITSA applies from 6 April 2026. Over £30,000, it applies from 6 April 2027. Over £20,000, from April 2028. Below £20,000, you're not affected — keep filing Self Assessment annually as before. The threshold is gross income, not profit, and includes income from multiple self-employed businesses combined.
£50,000 (April 2026), £30,000 (April 2027), £20,000 (April 2028). Income means gross turnover from self-employment plus gross rents from UK property — not net profit. Two side hustles each turning over £26,000 gross would put you in scope from April 2027. The thresholds are reviewed annually, so check before each tax year.
You stop filing the standard SA100 once you're in MTD. Instead, you submit four quarterly updates plus a Final Declaration (which replaces the annual return). The Final Declaration confirms your full year, includes any income outside the quarterly cycle (interest, dividends, capital gains), and triggers the tax calculation. Deadline: 31 January following the tax year, same as before.
Yes — but you must use HMRC-recognised software to submit. You cannot file MTD updates through the HMRC website like you could with old Self Assessment. Software handles the digital record-keeping (every income and expense logged in the right format), the quarterly submissions, and the Final Declaration. Many sole traders manage this themselves once they have the right tool.
Deadlines & penalties
An automatic £100 penalty hits the next day, even if you owe nothing. After three months (1 May), HMRC adds £10 per day for up to 90 days (£900 maximum). At six months, another £300 or 5% of tax owed (whichever is higher). At 12 months, the same again. Interest also accrues on unpaid tax from 1 February. Filing one day late is still £100 — there's no grace period.
£100 if 1 day late. From 3 months late: add £10 per day for up to 90 days (£900). At 6 months: add £300 or 5% of unpaid tax (greater). At 12 months: another £300 or 5% (greater). A return more than a year late can rack up over £1,600 in penalties before you've paid a penny of actual tax. Late payment of tax is separate — additional 5% surcharges at 30 days, 6 months, 12 months.
Yes, if you have a 'reasonable excuse' — bereavement, serious illness, fire/flood, postal delays, software failure, or HMRC's own service outages. You appeal in writing or online within 30 days of the penalty notice. HMRC won't accept 'I forgot', 'I didn't know I had to file', or 'my accountant failed me' as standalone reasons. Keep evidence (medical letters, screenshots, postmarks).
Standard deadline is 31 January for the prior tax year's balance, plus the first payment on account for the current year. If you can't pay in full, request a Time to Pay arrangement online (works for debts under £30,000 if you're up to date with returns). HMRC typically grants 6–12 month instalment plans. Apply before 31 January to avoid the late-payment surcharge stacking on top.
Sole-trader basics
Yes — two methods. The simplified flat rate: £10/month if you work 25–50 hours from home, £18/month for 51–100 hours, £26/month for 101+ hours. Or actual costs: a fair share of rent/mortgage interest, council tax, utilities, internet, based on rooms used and hours worked. Simplified is easier; actual costs win if you use a dedicated room a lot. You cannot claim both.
All sales receipts, invoices, expense receipts, bank statements, mileage logs, and VAT records (if registered). Keep them at least 5 years after the 31 January submission deadline of the relevant tax year. So records for the 2025/26 tax year (filed by 31 January 2027) must be kept until at least 31 January 2032. Digital records are fine — paper isn't required.
Only if your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (the threshold rose from £85,000 in April 2024). Below that, registration is voluntary — sometimes worth it if your customers are VAT-registered businesses (you can reclaim input VAT). Most sole traders, side-hustlers and CIS subbies are well below the threshold and don't need to bother.
By 5 October following the tax year you started self-employment. So if you started trading in May 2025 (within the 2025/26 tax year), you must register by 5 October 2026. Late registration penalties are based on the tax owed — typically 30% of the tax bill if HMRC catches you, more if they think it was deliberate. Register online via HMRC's website — it takes 10 minutes.
Built for the answers above
Trading allowance, CIS deductions, MTD updates, home-office expenses — built in, not bolted on. Join the waitlist for launch.