The trading allowance lets a person earn a set amount of casual or self-employed income each year tax-free without reporting it. For 2026-27 it is 1,000 GBP (HMRC), covering small side earnings before any tax or self assessment obligation arises.
In one line: The trading allowance is a tax-free amount of self-employed or casual income, 1,000 GBP for 2026-27.
How the trading allowance works
The allowance applies to gross trading or miscellaneous income. If receipts stay within it, the income need not be reported, and where they exceed it, the allowance can be deducted instead of actual expenses.
Someone earning 1,500 GBP from a side hobby in 2026-27 can deduct the 1,000 GBP (HMRC) trading allowance, leaving 500 GBP taxable. They could instead deduct real expenses if those are higher, but not both.
The allowance cannot be used against income from a person's own company or partnership, and it sits separately from the personal allowance that covers income generally.
Trading allowance vs the personal allowance
The personal allowance shelters total income across all sources. The trading allowance is a small, specific relief for trading and casual income, used either to exempt it or as an alternative to claiming expenses.
A person can use both: the trading allowance removes small side income from charge, while the personal allowance still applies to wages and other income in the usual way.
Primary source: GOV.UK: Tax-free allowances on property and trading income