The £1,000 Trading Allowance Explained (2025/26)
The £1,000 trading allowance is the most useful relief for UK side hustlers. It's been around since April 2017, but with HMRC's new platform reporting rules pushing more people into Self Assessment, understanding exactly how it works is suddenly relevant to millions.
What it is, in one sentence
If your gross trading income across all sources is £1,000 or less in a tax year, you owe £0 tax and don't need to file Self Assessment for it.
What "trading income" means
Income from any of these counts toward the £1,000:
- Selling things you bought or made (Vinted, eBay, Etsy, Depop, market stalls, casual sales)
- Providing services on a freelance/casual basis (Fiverr, Upwork, tutoring, dog walking, gig apps)
- Content creator income (OnlyFans, Substack, TikTok Creator Fund, sponsorships)
- Driving for Uber, Deliveroo, Just Eat
What does not count: rental income (use the separate £1,000 property allowance), employment income (already taxed via PAYE), savings interest, dividends.
How the choice works above £1,000
Earn over £1,000 gross? You have to file Self Assessment. On the return you choose, each year:
- Use the £1,000 trading allowance, subtract £1,000 from your gross income, pay tax on the rest. You cannot also claim expenses.
- Claim actual allowable expenses, deduct your real costs, pay tax on net profit.
Pick whichever results in the lower taxable profit. The calculator above does this automatically.
When the allowance beats expenses
The £1,000 allowance is more generous than actual expenses when your real costs are below £1,000. Typical scenarios:
- Selling personal/digital items with very low overhead (used clothing, digital downloads, low-cost services)
- Side hustles where postage and fees are well under £1,000
- Freelancers with minimal materials cost
When actual expenses beat the allowance
Once your real costs exceed £1,000, switch. Common cases:
- Print-on-demand sellers (supplier costs alone often hit thousands)
- Buy-to-resell traders (cost of stock)
- Content creators with equipment, software, agency fees
- Anyone running paid ads
Common misunderstandings
"I earned £900, so I'm fine forever"
The £1,000 is per tax year (6 April to 5 April). New year, fresh allowance.
"I have two side hustles, so I get £2,000"
No. The £1,000 trading allowance is per person, not per business. Add all trading income together.
"I can use the trading allowance for rental income"
No. Property income uses the separate £1,000 property allowance. They're parallel, not overlapping.
"I made a loss, so the allowance doesn't apply"
The trading allowance is on gross income, not profit. If your gross was £800, you don't need to file regardless of expenses or losses. If your gross was £3,000 with £4,000 of expenses, you have a £1,000 trading loss, and you may want to file to claim it forward against future profits.
"I have to register because I crossed £1,000 once"
True, but only for that year. If next year's gross is back under £1,000, you can de-register.
Worked examples
| Gross income | Real expenses | Best option | Taxable profit |
|---|---|---|---|
| £800 | £200 | Allowance covers it, no return needed | £0 (no tax) |
| £2,500 | £300 | Use £1,000 allowance | £1,500 |
| £2,500 | £1,800 | Claim expenses | £700 |
| £10,000 | £900 | Use £1,000 allowance | £9,000 |
| £10,000 | £4,500 | Claim expenses | £5,500 |