The Trading Allowance is a £1,000 tax-free allowance for UK trading or miscellaneous income — side hustles, casual work, hobby income. If your gross trading income is under £1,000 for the tax year, you don't need to declare it or pay tax. Above £1,000, you choose: deduct £1,000 as a simple allowance, OR deduct actual expenses. Whichever is higher.
When the Trading Allowance applies
It covers any UK trading income that isn't already taxed through PAYE. Common scenarios:
- Selling on Etsy, eBay, Vinted, Depop, Amazon Handmade
- Freelance writing, design, photography, tutoring
- Dog walking, pet sitting, babysitting
- Renting a parking space (not residential property)
- OnlyFans, Twitch streaming, YouTube AdSense, sponsored content
- Cash-in-hand casual work
The £1,000 is per person, per tax year — gross income, not profit. Two people running a joint Etsy shop each get £1,000.
Three scenarios above £1,000
Scenario 1: £800 income, no expenses. Under £1,000 → no declaration, no tax. Simple.
Scenario 2: £2,500 income, £200 of expenses. Two options:
- Deduct £1,000 Trading Allowance: taxable profit = £1,500
- Deduct actual expenses (£200): taxable profit = £2,300
Trading Allowance wins — taxable profit £1,500 vs £2,300. Tax at 20% basic-rate: £300 vs £460. Saves £160.
Scenario 3: £5,000 income, £3,500 of expenses.
- Deduct £1,000 Trading Allowance: taxable profit = £4,000
- Deduct actual expenses (£3,500): taxable profit = £1,500
Actual expenses win — taxable profit £1,500 vs £4,000. Tax at 20%: £300 vs £800. Saves £500.
Rule of thumb: use Trading Allowance if your expenses are below £1,000. Use actual expenses if they're above.
What about NI?
Income above £1,000 (after Trading Allowance or expenses) counts as self-employed profit. From April 2024:
- Class 2 NI mostly abolished. Self-employed with profits above £6,725 are deemed to have paid it.
- Class 4 NI remains: 6% on profits between £12,570 and £50,270, 2% above.
So a £5,000 side-hustle profit (after expenses) generates: £0 income tax (covered by PA if it's your only income), £0 NI (under £12,570 threshold). Combined with PAYE salary, the band stacking determines actual rates.
When you must register for Self Assessment
You must register and file Self Assessment if any of these:
- Trading income above £1,000 in the tax year
- Total income above £150,000 (the long-standing trigger, now £150,000 from 2024/25)
- HICBC applies (income above £60,000 + claim Child Benefit)
- Rental income above £1,000 or £2,500 net
- Untaxed savings interest above £10,000
Register at gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed. The deadline to register is 5 October following the tax year — i.e. 5 October 2026 for the 2025/26 tax year. File by 31 January 2027.
Check if you need Self Assessment
The side-hustle Self Assessment checker walks through every trigger and tells you whether you need to register.
Open the Self Assessment checker →Sources and methodology
Trading Allowance rules from gov.uk/guidance/tax-free-allowances-on-property-and-trading-income. Badges of trade from HMRC Business Income Manual. Self Assessment registration from gov.uk/check-if-you-need-tax-return.
UK Tax Drag is not authorised by the Financial Conduct Authority and does not provide regulated financial advice — see the content disclaimer for the full position. The methodology page documents how every calculator is built and reviewed.
Related
- Side-hustle Self Assessment checker — do I need to register?
- Sole trader tax calculator — tax and NI for self-employed
- Self Assessment first-timer guide — the registration and filing process
- What is National Insurance? — Class 2/4 explained
- Full UK money glossary
- FAQ library
Full relief vs partial relief — the two ways the allowance works
The £1,000 trading allowance operates in one of two modes, and which applies depends entirely on your gross trading income (turnover before any costs):
- Full relief — gross trading income of £1,000 or less. The income is automatically exempt. You do not pay tax on it and, provided it is your only untaxed income, you do not need to tell HMRC or register for Self Assessment. There is nothing to claim and nothing to file.
- Partial relief — gross trading income above £1,000. You register for Self Assessment and then choose, for that tax year, to deduct the flat £1,000 allowance instead of your actual expenses. You are taxed on (gross income − £1,000). You cannot deduct the £1,000 and your real costs as well — it is one or the other.
One more restriction worth knowing: you generally cannot use the trading allowance against income from a partnership, or against trading income you receive from your own employer or a company you control. It is designed for genuinely separate small-scale or self-employed activity.
The separate £1,000 property allowance
The trading allowance has an identical twin: the £1,000 property allowance, which works the same way for income from land and property — most commonly the kind of casual letting that falls outside a formal buy-to-let, such as renting out a driveway, a garage, or storage space.
The two allowances are separate and stackable across the two income types — they are not a shared £1,000. Someone with a small craft side hustle and a rented-out parking space can claim up to £1,000 against each:
| Income source | Gross income | Allowance | Taxable |
|---|---|---|---|
| Etsy craft sales (trading) | £900 | £900 | £0 |
| Parking-space rent (property) | £800 | £800 | £0 |
| Combined position | £1,700 | £1,700 | £0 |
Both are below their respective £1,000 limits, so the whole £1,700 is covered tax-free. Two important caveats: the property allowance cannot be combined with the separate Rent-a-Room scheme on the same income (you pick one), and the £1,000 property allowance is not available against income where Rent-a-Room relief is being claimed. As with trading, if your property costs exceed £1,000 you are usually better off deducting actual expenses instead.
Digital platform reporting — why HMRC now sees your side hustle
Since 1 January 2024, UK digital platforms — eBay, Vinted, Etsy, Depop, Airbnb, Uber, Deliveroo, Fiverr and similar — have been required under OECD-aligned rules to collect and report seller information to HMRC. The first reports covered the 2024 calendar year and were due to HMRC by 31 January 2025, with platforms also sending each affected seller a copy of the data reported about them.
Two points are widely misunderstood:
- This did not change the tax rules. No new tax was introduced, and the £1,000 trading allowance is unchanged. It is purely a data-sharing measure so HMRC can match platform activity against tax returns. If you were already within the allowance, nothing about your liability has changed.
- Low-volume sellers may be exempt from reporting. Platforms generally do not have to report a seller who makes fewer than 30 sales and receives under roughly €2,000 (about £1,700) in the year. Being below that reporting threshold is not the same as the £1,000 tax allowance, and it does not mean income above £1,000 is tax-free — your own tax obligation is set by the trading rules, not by whether the platform reported you.
The safest approach if you sell or earn online is to keep a simple running total of gross receipts per activity across the whole tax year, compare it with the £1,000 trading and £1,000 property limits, and register for Self Assessment if either is exceeded.
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