Trading Allowance

The Trading Allowance is a £1,000 annual exemption on casual self-employment and miscellaneous income. It was introduced in April 2017 and hasn't moved since — unlike the Personal Allowance, it's per source category, not per person.

If your total gross trading income for a tax year is £1,000 or less, you don't need to register for Self Assessment or declare it. That covers most side hustles, eBay reselling, the occasional freelance invoice, and small cash-in-hand jobs.

Above £1,000, you have a choice: either claim the £1,000 allowance as a flat deduction against your gross income, or deduct your actual expenses — whichever is higher. You can't do both. For someone with £3,000 of income and £200 of expenses, the allowance wins. For someone with £3,000 of income and £1,500 of expenses, actual expenses win.

The allowance doesn't cover rental income (that has its own £1,000 Property Allowance), partnership income, or income from a company you control. And if you claim the allowance, you can't also claim expenses on the same trading income — it's fully in-lieu.

Related terms

• Self Assessment — HMRC's system for declaring income not taxed at source — filed annually by the self-employed, landlords, and many directors.
• Personal Allowance — The first slice of income you can earn tax-free each year — £12,570, frozen until April 2031.
• Class 4 National Insurance — NI for sole traders — 6% main rate on profits between £12,570 and £50,270, 2% above.