I work full-time earning a salary of £45,000 a year, but I have recently started a small side business selling handmade products online. I expect the business to generate around £8,000 in sales, with expenses of approximately £3,000. I have always assumed that because this is only a small amount of additional income, I wouldn't need to worry about self-assessment. Do I need to register for self-assessment, and would it be better to claim the £1,000 trading allowance or deduct my actual expenses?
Arthur Weller replies:
You do need to register your new self-employed business for self-assessment. Claiming the £1,000 trading allowance is not for you in the circumstances described, because: (a) your expected turnover is £8,000, well over the £1,000 threshold; and (b) if you claimed the trading allowance you could not claim business expenses, so you would be taxed on £8,000 - £1,000 = £7,000, as opposed to not claiming, and being taxed on £8,000 - £3,000 = £5,000. If you started your new business in the current tax year (i.e., after 5 April 2026), you must register for self-assessment with HMRC by 5 October 2027.
