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Home › Tax glossary › Trading allowance
UK tax glossaryUpdated October 2026What is the trading allowance?
A plain-English explanation from Cangaf's ACCA-qualified accountants, with the 2026/27 rules.
Trading allowance in briefThe trading allowance is a £1,000 tax-free allowance for income from self-employment, casual work and side hustles. If your gross trading income is £1,000 or less in a tax year, you don't need to tell HMRC. If it's more, you can deduct £1,000 instead of your actual expenses, whichever gives the lower tax bill.
Key facts
| Amount | £1,000 per tax year, per person |
| Applies to | Gross income from trading, casual services and side hustles |
| Below £1,000 | No need to register or report |
| Above £1,000 | Register for Self Assessment and deduct either £1,000 or your actual expenses |
Allowance or expenses?
You can't claim both. If your expenses are more than £1,000, claim the expenses. If they're less, deducting the £1,000 allowance usually gives a lower tax bill and saves record-keeping.
When you can't use it
You can't use the trading allowance against income from a company or partnership you're connected to, or from your employer or your spouse's employer.
Property allowance
There's a separate £1,000 property allowance for small amounts of rental income, such as renting a driveway. You can use both allowances in the same year.
Common questions
Is the trading allowance £1,000 profit or £1,000 income?
It's based on gross income, before expenses. If you earn £1,500 and spend £800, you're over the allowance and must register, although you may still owe little or no tax.
Do I need to tell HMRC about selling on Vinted?
Not if you're selling your own unwanted items, which isn't trading. If you buy to resell or make things to sell, and earn over £1,000, you need to register.
Can I use the trading allowance if I'm employed?
Yes, for side income from a separate trade. It doesn't apply to work done for your own employer.
Official guidance: Tax-free allowances on property and trading income (GOV.UK)
