The Personal Allowance
The Personal Allowance is £12,570 per year (frozen until at least 2028). This covers all income — employment, self-employment, rental income. You pay no income tax on your first £12,570 of earnings per tax year.
If you earn above this, income tax is charged at 20% on earnings up to £50,270, then 40% above that.
The trading allowance
On top of the Personal Allowance, the £1,000 trading allowance covers self-employment income from side hustles, selling and similar activities. You do not need to register as self-employed if your total trading income is £1,000 or less per year.
Above £1,000, you must register with HMRC as self-employed and declare the income via Self Assessment.
National Insurance for self-employed
If your self-employed profits (income minus expenses) exceed £12,570, you pay Class 4 National Insurance (9% between £12,570 and £50,270). Class 2 NI contributions build your State Pension entitlement.
How to register
Register as self-employed at GOV.UK. It takes around 10 minutes online. You will receive a Unique Taxpayer Reference (UTR) by post and can then submit a Self Assessment tax return each January for the previous tax year.