when people will pay to see/hear you play, and don't throw things at you while you are. Depends what you are playing. For most pop for instance, you're good to go when you can play E, A & D!

If you can play your set note perfect without fail, you're ready....

I didn't have confidence in my ability until I passed a certain grading exam, and then I felt happy. It didn't make me play any better, but in my experience it's common for musicians to lack self-belief in the early days... after a while we become ego maniacs... it's best to stay in the middle....