What Is It?
The Trading Allowance is a tax-free allowance of £1,000 for income from self-employment or casual services. If your total income from these activities is £1,000 or less, you don't need to tell HMRC or pay any tax.
💡 Perfect for: eBay sellers, Etsy makers, private tutors, freelance writers, dog walkers, and anyone with a small side income.
How It Works
You have two options when using the Trading Allowance:
Option 1: Use the Allowance
If your income is under £1,000, claim the full allowance. You pay no tax and don't need to declare it.
Option 2: Deduct Actual Expenses
If your expenses are high, you can choose to deduct actual costs instead of using the £1,000 allowance. This might save more tax if expenses exceed £1,000.
Important Rules
- •You cannot use both the Trading Allowance and deduct expenses. It's one or the other.
- •If your income exceeds £1,000, you must register for Self Assessment and declare it.
- •The allowance is per person, per tax year. Couples can each claim £1,000.