What Is the Trading Allowance? (UK 2025/26)

The trading allowance gives you £1,000 of tax-free income from self-employment or casual trading each year. If your total trading income is below £1,000, you do not need to tell HMRC about it, register for self-assessment, or pay any tax on it.

How It Works

The allowance applies to gross income (before expenses), not profit. If your trading income exceeds £1,000, you have a choice: deduct the £1,000 trading allowance instead of your actual expenses, or deduct your actual expenses as normal. You cannot do both. For most people with minimal expenses, taking the flat £1,000 allowance is simpler.

What Counts as Trading Income

This covers any self-employed or freelance income — selling goods online, tutoring, freelance work, odd jobs, and similar activities. It does not cover income from employment (which goes through PAYE) or income from a partnership.

Property Allowance

There is a separate but identical £1,000 property allowance for rental income. If you rent out a room or property and receive less than £1,000 per year in gross income, you do not need to report it. This is different from Rent-a-Room Relief, which has a higher threshold.