The £1,000 Trading Income Allowance: Explained
Tax advice
August 2021

The £1,000 Trading Income Allowance: Explained

Find out how the £1,000 income trading allowance from HMRC works and if you can use it with our helpful guide.

Adam Goodall
Adam Goodall
Co-founder at Coconut
No items found.

If you earn less than £1,000 in self-employed income

This might apply if you have a job where you earn PAYE and you have a side-hustle. You can earn up to £1,000 in the tax year on your side gig before you have to declare it.

If this applies to you, you don't have to register as self-employed, and you don't need to do a tax return.

If you earn more than £1,000

If you run your business as a sole trader, you now have an option to take a simplified approach to your tax return:

  1. Record your allowable expenses and then subtract these from your income, so you calculate tax on a lower number.
  2. Alternatively, you can use the "trading allowance" to deduct £1,000 from your income—but you'll be unable to claim any other expenses.

You can decide which one you use each year, so the best thing to do is keep track of your expenses throughout the year, and if they're less than £1,000, use the allowance instead.

The trading allowance is not available to partnerships, partners, or limited companies.


No items found.

Coconut helps you track income, claim expenses and sort your taxes. Start your 30-day free trial now.

Get Started
Sign Up

Keep reading

MTD for ITSA: The £360 Million Opportunity for Accountants

We commissioned Opinium to survey 500 UK sole traders to better understand their views on Making Tax Digital for Income Tax, how prepared they are for the changes, and what action they expect to take to become compliant with the rules. The results revealed an incredible opportunity for the accounting industry.


A Complete Guide To Self Assessment Tax Returns

Self Assessment tax returns are a key task in every self-employed person’s to-do list. In this guide, we cover everything you need to know about completing your tax return for HMRC, so you know exactly what income you need to declare.


Why Coconut's Current Accounts Are Closing

We recently announced that all Coconut current accounts will be closing on 30th June 2022. Read on to find out more about what this change to our service means, why we’re doing it, and what it means for the future of Coconut.