The £1,000 trading allowance explained
The trading allowance lets you earn up to £1,000 a year from small trading or side income without paying tax on it. It is a flat allowance: you do not need to work out profit.
How it works
- It applies to gross income, so you compare £1,000 with the money you received, before costs.
- Under £1,000: income is covered, and you normally do not need to report it.
- Over £1,000: you choose between two methods. Either deduct the £1,000 from your income, or deduct your actual expenses. You cannot do both.
Which method is better?
| Income | Expenses | Better option |
|---|---|---|
| £3,000 | £600 | Allowance: taxable £2,000 instead of £2,400 |
| £3,000 | £1,800 | Expenses: taxable £1,200 instead of £2,000 |
The break-even is easy: if your real costs are more than £1,000, claiming expenses is usually better.
Separate property allowance
There is a second £1,000 allowance for property income such as renting out a driveway or storage space. It is separate from the trading allowance.
Try the free checker to see it with your numbers.
Want this done for you?
The UK Side Hustle Tax Tracker (Excel, £9) keeps your income, expenses and mileage in one place and shows whether the £1,000 allowance or actual expenses is better for you. Or get it with a fee calculator and security guide in the Starter Bundle (£19).