The £1,000 trading allowance

GOV.UK says the allowance applies to income from self-employment, from casual services such as babysitting or gardening, and from hiring out personal equipment such as power tools. HMRC's information sheet on selling online adds that money from goods, services such as tutoring, cleaning or dog walking, and online content is added together for this test.

The test is on gross income, the money coming in, not on profit. If you earn £1,000 or less in a tax year from all your trading activities combined, you do not need to tell HMRC, unless you cannot use the allowance for one of the reasons below or you need to register for another reason. You must still keep records of the income, so that you can show how much it was if HMRC asks.

The allowance is not available for every kind of trading income. GOV.UK says you cannot use it in a tax year if the income comes from:

• a company you or someone connected to you owns or controls
• a partnership where you or someone connected to you are partners
• your own employer, or your spouse's or civil partner's employer

It also does not apply to your share of trading income from a partnership. These rules stop people moving ordinary pay or company income into the allowance. A director doing extra work for their own company, for instance, cannot treat that payment as covered.

Once your trading income passes £1,000, you have a choice. GOV.UK explains that you can use the allowance instead of deducting any expenses, which means taking £1,000 off your income and paying tax on the rest. Alternatively, you can ignore the allowance and deduct your actual allowable expenses in the normal way. You cannot do both: if you claim the allowance, you cannot deduct any other expenses or allowances.

Which is better depends on your costs. GOV.UK notes that if your expenses are more than your income, it may be beneficial to claim expenses instead of the allowance, and the same logic applies whenever your costs come to more than £1,000, so it is worth adding up your receipts before you decide.

The trading allowance has a twin. GOV.UK describes the property allowance as a separate tax exemption of up to £1,000 a year for income from land or property, and says that if you have both types of income you get a £1,000 allowance for each, so someone who sells crafts and also lets a parking space can, in principle, use both. Each is claimed on its own income, and the same choice between the allowance and actual expenses applies to each. Our guide to the £1,000 property allowance covers rental income in more detail.

At the Autumn Budget on 28 October 2026, the government published a policy paper saying the measure increases the amount of the trading allowance from £1,000 to £3,000. It will have effect from 6 April 2027, for the 2027 to 2028 tax year onwards, and the self assessment reporting threshold for trading income will rise to £3,000 as well. Legislation in the Finance Bill 2026-27 will change the current law, so for now this is announced rather than in force, and the £1,000 limit still applies to the 2026 to 2027 tax year.

The property allowance is not mentioned in that paper, so under the current rules it remains £1,000.

If your income is above the allowance, our guide to paying tax on a side hustle explains what happens next, and what records to keep helps whichever way you claim. The detail above is general information, not tax advice. For help deciding between the allowance and expenses, our sole trader accountants page explains the support available, and if you send us an enquiry through get in touch, we will read it and, where we can, put you in touch with a local accountant.