What is the £1,000 trading allowance?
The trading allowance is up to £1,000 a year of tax-free trading income. If your gross trading income is £1,000 or less, you get full relief and generally do not need to tell HMRC. If it is more, you can deduct £1,000 instead of your actual expenses, or register for Self Assessment.
Figures checked against gov.uk on . General information, not tax advice.
At a glance
- Allowance
- Up to £1,000 a year, measured on gross income
- Income £1,000 or less
- Full relief; generally no need to tell HMRC (exceptions apply)
- Income over £1,000
- Register for Self Assessment; deduct up to £1,000 or your expenses
What it covers and what it does not
gov.uk says the allowance covers self-employment, casual services such as babysitting or gardening, and hiring out personal equipment such as power tools. It does not apply to trading income from a partnership.
You cannot use it for income from a company you or a connected person own or control, a partnership in which you or a connected person is a partner, or your employer or your spouse's or civil partner's employer.
Allowance or expenses
Over £1,000 you choose: deduct up to £1,000, never more than your income, or claim your actual allowable expenses. You cannot claim expenses if you use the allowance, so work out which gives the lower profit. If your costs are above £1,000, expenses usually win.
Some people must register and file even at £1,000 or less, such as those claiming a loss relief or Maternity Allowance based on self-employment. Keep records of your income either way.