UK £1,000 trading allowance: a practical guide
If you sell online, do odd jobs, or run a small side hustle, HMRC’s trading allowance can make the first £1,000 of trading income tax-free. This page summarises the well-known basics so you can decide what to do next. It is general guidance only, not tax advice.
What is the trading allowance?
The trading allowance lets individuals claim up to £1,000 against trading (business) income in a tax year (6 April to 5 April). It covers casual trading and small side hustles — for example selling clothes online, babysitting, or freelance odd jobs.
There is a separate £1,000 property allowance for some rental income; this guide is about trading income only.
Full relief (income £1,000 or less)
If your gross trading income in the tax year is £1,000 or less, you can usually treat that income as tax-free. In many cases you do not need to tell HMRC, unless you have another reason to file (for example claiming a loss).
Keep simple records of what you earned, even when you stay under £1,000.
Partial relief (income over £1,000)
If your gross trading income is over £1,000, you can choose one of these — not both:
- £1,000 trading allowance — deduct £1,000 from gross income; you cannot also deduct actual expenses.
- Actual allowable expenses — deduct real business costs instead of the allowance.
Rule of thumb: if your allowable expenses are more than £1,000, claiming expenses usually gives a lower taxable profit. If expenses are under £1,000, the allowance often wins.
If gross trading income is over £1,000, you normally need to register for Self Assessment by 5 October after the end of the tax year.
When you usually cannot use it
You generally cannot claim the trading allowance on income from your employer, your spouse’s or civil partner’s employer, or a company or partnership you are connected to. In those cases you typically use actual expenses (or other rules that apply to that income).
Allowance vs expenses — quick check
Use the free calculator to compare both methods with your own figures.
Open the trading allowance calculatorOr read the household bills & budget guide if you are organising home costs instead.
Track sales all year in a spreadsheet
Tidy Sheets makes simple UK templates: a Free £1,000 Trading Allowance Checker (lead magnet) and the full UK Side-Hustle Income & Expense Tracker (£9) with dashboard, tax-month totals and an expenses log.
Browse Tidy Sheets templatesOfficial source
Always check the latest rules for your situation on GOV.UK:
Tax-free allowances on property and trading income (GOV.UK)
This page is for individuals with simple trading income. Partnerships, losses, VAT and other special cases are outside its scope.