The £1,000 Trading Income Allowance: Explained
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Tax advice
18
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
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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.

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