The £1,000 Trading Income Allowance: Explained
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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Coconut is the trading name of Coconut Platform Ltd, company number 09904418. Coconut is registered with the Financial Conduct Authority (FCA) as an Account Information Service Provider under the Payment Services Regulations 2017 (reference 931194).

Coconut provides some customers with a business current account, but is not a bank. The Coconut current account is an e-money account provided by Prepay Solutions (PPS), a trading name of Prepay Technologies Ltd, which is an electronic money institution authorised by the FCA under the Electronic Money Regulations 2011 (reference 900010) for the issuing of electronic money.

PPS holds all funds in a safeguarded account in accordance with the Electronic Money Regulations 2011 which protects customers against Coconut or PPS’s insolvency. The Coconut Mastercard is also issued by PPS pursuant to a licence by Mastercard International.