Definition
The trading allowance is a tax exemption for the first £1,000 of income a person receives each tax year from self-employment or casual work. Income of £1,000 or less does not normally need to be reported.
How it works
| Gross trading income in the tax year | What happens |
|---|---|
| £1,000 or less | It is tax-free and you do not normally need to register for Self Assessment because of it. |
| More than £1,000 | You must report it. You can deduct either your actual expenses or the £1,000 allowance, whichever is higher, but not both. |
The limit applies to income before expenses, and to all your trades and casual income added together.
When it cannot be used
You cannot use the trading allowance against income from your own company, your employer, or a partnership you are a partner in. If your expenses are more than £1,000, or you have made a loss you want to claim, deducting actual expenses will be better.
The property allowance
There is a separate £1,000 property allowance for rental income, which works in the same way.
Read more: Entering your income and Getting started with Self Assessment.