TL;DR
The UK trading allowance gives GBP 1,000 of self-employed income free of tax and the need to register. This guide covers what counts as trading income, when to use the allowance versus actual expenses, and the property allowance.
Key facts
- Trading allowance GBP 1,000 a year per individual.
- Income at or below GBP 1,000 needs no registration or reporting.
- Above GBP 1,000: must register and file SA, but can deduct GBP 1,000 from gross.
- Choice between actual expenses or GBP 1,000 allowance.
- Property allowance GBP 1,000 separate from trading allowance.
- Both allowances applicable in the same year for different sources.
- Cannot use allowance against employment, pension or rental from same source.
- Section 783A ITTOIA 2005 codifies the allowance.
The trading allowance was introduced from 6 April 2017 to simplify tax for small-scale traders. Income up to GBP 1,000 from self-employment is free of tax and the need to register. Above GBP 1,000, registration is required but the GBP 1,000 can be deducted as an alternative to actual expenses.
This guide covers what counts as trading income, the choice between the allowance and actual expenses, the property allowance equivalent, and the practical implications for casual sellers, gig workers and side-hustle traders.
What counts as trading income
Trading income covers self-employed income from buying and selling, providing services, freelance work, gig economy earnings, casual eBay or Vinted selling above hobby level, occasional dog walking or pet sitting, weekend craft selling, and any other commercial activity. The badges of trade in HMRC's BIM20205 distinguish trading from hobby selling.
The GBP 1,000 allowance applies to gross trading income, not net profit. A trader with GBP 800 of gross sales and GBP 400 of expenses has GBP 800 of gross trading income (under the allowance, no action needed). A trader with GBP 1,500 of gross sales and GBP 800 of expenses has GBP 1,500 of gross trading income (above the allowance, registration required).
Multiple small sources combine. A side-hustle trader with GBP 600 from eBay, GBP 500 from dog walking, and GBP 200 from freelance writing has GBP 1,300 of combined gross trading income. The allowance is per individual, not per source - the GBP 1,300 exceeds the GBP 1,000 cap and triggers registration.
Edge case: hobby selling of personal possessions (decluttering, selling old furniture or clothes) is not trading and is outside both the trading allowance and SA. The distinction is between buying-to-sell with profit intent (trading) and selling personally-used items (hobby). HMRC's BIM20275 sets out the badges of trade.
Below GBP 1,000: no action needed
Where total gross trading income is at or below GBP 1,000 in a tax year, no SA registration is needed and the income does not need to be declared. The trader simply keeps records sufficient to evidence the income level if HMRC asks.
This works for a wide range of casual activity: an eBay seller turning over GBP 800 a year of crafts, a person dog walking occasionally for GBP 700 a year, a weekend tutor earning GBP 500. None need to register or file.
The threshold is per tax year, not cumulative. A trader at GBP 800 in 2026/27 and GBP 1,200 in 2027/28 has no obligation in 2026/27 but must register and file for 2027/28. Tracking annual income is essential.
Practical action: keeping a simple record of gross income (a spreadsheet, an app, even handwritten notes) makes the annual tracking straightforward. Once the trader sees income approaching GBP 1,000, they prepare for SA registration with HMRC.
Above GBP 1,000: registration and the deduction choice
Once gross trading income exceeds GBP 1,000, SA registration is required by 5 October following the tax year. The trader has a choice on the SA return: deduct actual expenses, OR deduct the GBP 1,000 allowance instead.
The allowance is more beneficial where actual expenses are under GBP 1,000. A trader with GBP 1,500 of income and GBP 300 of expenses uses the GBP 1,000 allowance for a taxable profit of GBP 500 (versus GBP 1,200 under actual expenses).
Actual expenses are more beneficial where they exceed GBP 1,000. A trader with GBP 5,000 of income and GBP 1,800 of expenses uses actual deduction for a taxable profit of GBP 3,200 (versus GBP 4,000 under the allowance).
The choice is made annually on the SA return; there is no permanent election. A trader can use the allowance one year and actual expenses the next as circumstances change. The choice is per source within a year; a trader with two distinct trading activities can use the allowance for one and actual expenses for the other only if each activity is genuinely separate.
Property allowance: the GBP 1,000 equivalent for rental
The property allowance (also GBP 1,000 a year per individual) operates on parallel lines for rental income. Property income at or below GBP 1,000 needs no registration or reporting. Above GBP 1,000, registration is required and the allowance can be deducted instead of actual expenses.
The Rent a Room scheme is a separate, larger allowance for furnished room rental in a main home: GBP 7,500 a year (GBP 3,750 if shared). The Rent a Room scheme and the property allowance cannot both apply to the same property; the choice is between them.
The trading allowance and the property allowance are separate. A taxpayer with GBP 800 of trading income and GBP 800 of rental income has both under the respective allowances - no action needed.
Worked example: a part-time eBay seller earning GBP 900 and renting out a parking space for GBP 800 a year. Trading allowance covers the eBay income (no action needed). Property allowance covers the parking rental (no action needed). Total tax-free side income GBP 1,700 across two allowances.
Side hustle and gig economy: when to register
The gig economy (delivery drivers, ride-share drivers, platform-based freelancers) typically produces income above GBP 1,000 a year for active workers. Registration as self-employed is the standard route. Platforms like Uber, Deliveroo, Just Eat report annual earnings to HMRC under the Information Exchange rules from January 2024, so HMRC has visibility.
Casual side hustles below GBP 1,000 a year (occasional Etsy sales, weekend craft selling, sporadic freelance work) can use the trading allowance without SA registration. As soon as income exceeds GBP 1,000, the trader should register by 5 October following the tax year.
Pre-emptive registration is permitted. A trader expecting to exceed GBP 1,000 can register at any time before the deadline. Some traders prefer to register early to establish the SA relationship; others prefer to wait until the threshold is actually exceeded.
Practical action: tracking gross income monthly through a simple spreadsheet or app reveals the trajectory. Where the annual run-rate is approaching GBP 1,000, the trader prepares for registration. Where well below, the allowance covers the position without further action.
Trading allowance and partnerships
The trading allowance does not apply to partnership profits received by individual partners. Section 783AA ITTOIA 2005 specifically excludes partnership distributions from the allowance. A partner with GBP 800 of profit-share from a partnership cannot use the trading allowance on that income.
This is one of the few situations where structure matters for the trading allowance. A sole trader with the same GBP 800 of income would qualify for the allowance; the partner does not. The difference reflects the formal partnership tax framework where each partner's share is determined and reported separately.
However, a partner who also has separate sole trader activity outside the partnership can use the allowance on that separate activity. The allowance per individual continues to apply to non-partnership trading.
Worked example: a person is a partner in a partnership receiving GBP 18,000 of profit-share. They also run a separate weekend craft business generating GBP 700 of gross income. The partnership profit is taxed in full. The GBP 700 craft income is below the trading allowance and needs no further action.
Disclaimer
This article provides general information based on rules and figures published by UK government and regulator sources as of May 2026. It is not personal financial, legal, immigration or tax advice. Rules, fees and figures change and individual circumstances vary. Readers should check primary sources or consult a qualified, regulated adviser before acting on any information here.
Frequently asked questions
What is the UK trading allowance?
GBP 1,000 a year of self-employed income free of tax and the need to register, under section 783A ITTOIA 2005. Income at or below GBP 1,000 needs no SA registration or reporting. Above GBP 1,000, registration is required but the GBP 1,000 can be deducted from gross income instead of actual expenses where that produces a lower taxable profit.
Do I have to declare income under GBP 1,000?
No. Income at or below the trading allowance of GBP 1,000 does not require SA registration or reporting. Multiple small sources combine - GBP 600 from eBay plus GBP 500 from dog walking exceeds the allowance and would trigger registration. Tracking annual gross income across all trading activities reveals when registration becomes due.
Trading allowance or actual expenses: which is better?
Actual expenses if they exceed GBP 1,000; the allowance if expenses are below GBP 1,000. A trader with GBP 5,000 income and GBP 1,800 actual expenses uses actual for taxable profit of GBP 3,200. A trader with GBP 5,000 income and GBP 200 expenses uses the allowance for taxable profit of GBP 4,000 (versus GBP 4,800 under actual). The choice is made annually on the SA return.
Can I claim both the trading allowance and the property allowance?
Yes for separate sources. A taxpayer with self-employed income and rental income can use the GBP 1,000 trading allowance for the self-employment and the GBP 1,000 property allowance for the rental. Both allowances are separate. The combined tax-free side income reaches GBP 2,000 a year where both apply.
What about the Rent a Room scheme?
The Rent a Room scheme allows GBP 7,500 a year tax-free for furnished room rental in a main home (GBP 3,750 if shared). It is separate from the property allowance and the trading allowance. Rent a Room cannot apply alongside the property allowance to the same property; the choice is between them. Most resident landlords renting a furnished room benefit from Rent a Room over the property allowance because of the higher threshold.
