Simple Salary Self-employed Trading allowance explained
The £1,000 trading allowance explained
The £1,000 trading allowance lets you earn a little from a side hustle, casual work or selling things without paying tax or telling HMRC. Here is how it works, when it stops being enough, and whether to use it instead of expenses.
How it works
If your total trading income before expenses is £1,000 or less in a tax year, it is tax-free and you do not need to register for Self Assessment or report it. If it is more, you can choose to deduct the £1,000 allowance from your income instead of your actual expenses.
There is a separate £1,000 property allowance for rental income, which works the same way. You can use both in the same year if you have both kinds of income.
Three examples
| Income | Expenses | Best choice | Taxable profit |
|---|---|---|---|
| £800 | £100 | Nothing to do | £0, no need to report |
| £4,000 | £300 | Trading allowance | £3,000 |
| £4,000 | £1,800 | Actual expenses | £2,200 |
Use the allowance when expenses are under £1,000; claim expenses when they are over. The self-employed tax calculator picks the better one for you.
When you cannot use it
- Income from your employer, or a company or partnership you (or someone close to you) control.
- Partnership income.
- Rent-a-Room income (that scheme has its own £7,500 allowance).
- If you claim the allowance you cannot also claim expenses or make a loss for that trade.