Side income in the UK: £1,000 tax-free, then what? (2026)

People ask "how much can I earn on the side before paying tax?" as if there were one number. In the UK there almost is: £1,000. But that number is a trading allowance, not a tax-free wage, and what happens above it depends on everything else you earn.

This guide walks through the rules from GOV.UK, the new platform reporting, and a worked example with real parcel fees. It is written for people who pack parcels from home, but the tax part applies to any small side income.

How much can you earn on the side before paying tax in the UK? #

The trading allowance lets individuals earn up to £1,000 a year from trading — self-employment, casual services such as babysitting or gardening, or hiring out personal equipment — without it being taxed. At or below £1,000 gross, you usually do not report it.

Above £1,000 the allowance does not disappear: you still deduct it, and only the rest counts. Whether you then pay anything depends on your other income. The personal allowance for 2026/27 is £12,570; the basic rate of 20% applies from £12,571 to £50,270 and the higher rate of 40% from £50,271.

What counts as trading income, and what does not? #

HMRC’s line is simple. Selling your own unwanted things — the contents of a loft or garage — is unlikely to be taxed. Buying or making goods to sell at a profit, or being paid for a service, is trading.

Packing parcels for a shop in exchange for a fee per parcel is a paid service, so it is trading income. It does not matter that it is small or that you do it from your kitchen table.

The allowance does not apply to income from your employer (or your spouse’s or civil partner’s employer), from a partnership, or from a company you or someone connected to you owns or controls. A shop you have no link with is none of those.

When do you need to register for Self Assessment? #

Once your gross trading income in a tax year is over £1,000, you register for Self Assessment. The UK tax year runs from 6 April to 5 April, not January to December.

Should you use the allowance or claim expenses? #

Above £1,000 you choose: deduct the flat £1,000 allowance, or deduct what you actually spent. Not both. GOV.UK notes that claiming expenses may be better if they are higher than the allowance.

For parcel packing, real expenses are small. The shop pays for every label, the stock is the shop’s, and several UK carriers collect from your door. What remains is paper and ink for labels, tape, and perhaps a trip to a drop-off point. In almost every case the £1,000 allowance is the bigger number.

One detail: our 3% payout commission is a cost. If you take the £1,000 allowance you cannot also deduct it, so your gross is the fees you earned, not what reached your bank.

What does HMRC digital platform reporting mean for you? #

Since 1 January 2024, digital platforms collect details about their sellers and report their income to HMRC. The first reports, covering 2024, were due by 31 January 2025. Platforms must also give you a copy of what they reported.

• Goods: a seller with fewer than 30 sales and €2,000 (about £1,700) or less in a year does not have to be reported.
• Services: that exemption does not apply. Delivering food, driving, freelancing and other personal services are reportable whatever the amount.
• Tax: HMRC is explicit that being reported does not automatically mean you owe tax. There were no new taxes for online sellers.

The practical effect is that HMRC can now see side income it used to rely on people to declare. If you are over £1,000, the report and your tax return should tell the same story.

Worked example: packing parcels from home #

As a sender you set your own fee per parcel size. The app recommends €2.25 for a small parcel and €3.00 for a medium one. Your balance is in euros and payouts land in your UK bank account in pounds. How that works is in How do payouts work for senders?.

Is 10 small parcels a week over the line? That depends on the exchange rate: €1,080 stays under £1,000 as long as £1 buys more than €1.08. At 5 a week you are well under; from 25 a week you are clearly over.

1. 1

   Add up your fees for 6 April to 5 April

   Your wallet has a yearly overview per quarter: fees, shipments and what was withheld. Use the dates, not a calendar year.

2. 2

   Convert to pounds

   Your payouts arrive in pounds, so your bank statements are a ready record. Whatever method you use, use it consistently.

3. 3

   Deduct £1,000

   Say your fees came to £2,000. With the trading allowance, £1,000 is taxable profit.

4. 4

   Apply your own rate

   No other income: that £1,000 sits inside your personal allowance and the tax is £0. Next to a basic-rate job: 20%, so £200. Keep that aside as you go.

Where the volume comes from and how long a parcel takes is in How much can you earn packing parcels from home?.

Which UK carriers collect from your door? #

Travel is the one real expense this work can have, so it matters whether you have to go anywhere. These are the domestic UK services on the shipping options page, measured on 29 September 2026, for a small parcel up to 5 kg.

Five of the seven services are collected at your door, and the collection day is on the label. If you tick only those, your costs for this work are close to paper and tape.

What about National Insurance and Making Tax Digital? #

• Class 4 National Insurance is 6% on self-employed profits over £12,570 (2026/27). A side income on top of a job usually stays far below that.
• Making Tax Digital for Income Tax applies to sole traders with qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. Parcel packing on the side does not come near it.
• Universal Credit is separate from tax: you report self-employed income and expenses at the end of every monthly assessment period.

What the work involves in the UK, from sign-up to drop-off, is in Earn from home packing parcels in the UK.