How the UK £1,000 trading allowance works (2026/27)

Last Updated on May 26, 2026

What is the UK £1,000 trading allowance?

The trading allowance is a tax exemption that lets individuals earn up to £1,000 of trading or casual income per year without paying income tax or national insurance. If your gross income stays below the threshold of £1,000, you don’t need to report it to HMRC or register for Self Assessment.

What counts as trading income for the £1,000 trading allowance?

Trading income includes money earned from self-employment, casual work or running a small business or side hustle, such as dog walking, gardening or selling handmade items. It does not include employment income (salaries), investment income, or rental income (which has its own separate £1,000 property allowance). It is important to note that the £1,000 allowance applies to gross income or sales, not net profit (sales less expenses). If your sales or gross income from trading exceed £1,000 for the tax year, you must register with HMRC for Self Assessment and submit a tax return.

Can I benefit from the trading allowance if I’m already employed?

Yes, the allowance is available to employed people as well as self-employed individuals. If you have a PAYE job and earn additional income from a side hustle, such as freelancing, tutoring, or selling handmade goods, the £1,000 allowance applies to that extra income, regardless of your employment status.

Does the trading allowance apply to online sales, such as Vinted, eBay and Etsy?

It can, but it depends on whether HMRC considers your activity as trading. Selling off old personal possessions is generally not classed as trading and isn’t taxable. However, if you’re regularly buying items to resell at a profit, HMRC may treat this as a trading activity, in which case the £1,000 trading allowance will apply.

Do I need to tell HMRC if my trading income is under £1,000?

No. If your gross trading income for the tax year is below £1,000, you don’t need to register for Self Assessment or report it to HMRC. The allowance is automatic, and there’s nothing to claim or submit.

What happens if my trading income goes over £1,000?

Once your gross trading income exceeds £1,000, you must register for Self Assessment and complete a tax return. You then have two options for calculating your taxable profit: deduct the £1,000 trading allowance from your gross income, or deduct your actual business expenses. You should choose whichever results in the lower tax bill.

Examples of how the trading allowance works for different income levels

Example of trading income below £1,000

If you make less than £1,000 a year doing occasional gardening work, you don’t need to register for Self Assessment, and your earnings are tax-free :

• Your total gross income for the year is: £850
• Your expenses are: £200, and your net profit is £650
• As your gross income is under £1,000, you don’t need to report this to HMRC or register for Self Assessment

Example of trading income over £1,000

You sell handmade jewellery on Etsy and make an income of over £1,000:

• Income received from Etsy after their commission is deducted: £1,140
• Etsy commission deducted from sales: £60
• Your total income is £1,200, as you must add Etsy’s commission to the income received to calculate your gross income
• Your expenses are £240 plus £60 Etsy commission, so £300 in total
• Because your gross income exceeds £1,000, you must register for Self Assessment
• You have two options for calculating your taxable income:

• Deduct the trading allowance: £1,200 – £1,000 = £200 taxable profit
• Deduct actual expenses: £1,200 – £300 = £900 taxable profit

In this example, it is more beneficial to deduct the trading allowance, resulting in a taxable income of £200, compared with a taxable income of £900 if actual expenses are deducted.

Multiple side hustles

If you have several side hustles, the £1,000 allowance applies to their combined income:

• Online tutoring: £600
• Weekend car washing: £500
• Total income: £1,100
• Since the combined income exceeds £1,000, you need to register for Self Assessment
• You can still use the trading allowance against the total amount

Example of higher income

You provide freelance graphic design work:

• Total income: £5,000
• Expenses (software, equipment): £1,500
• In this case, you should deduct actual expenses rather than the trading allowance
• Taxable profit using expenses: £5,000 – £1,500 = £3,500
• Taxable profit using trading allowance: £5,000 – £1,000 = £4,000
• Deducting actual expenses saves you £500 in taxable income

Can I use both the trading allowance and deduct my actual expenses?

No, it’s one or the other, as you cannot use both in the same tax year. If your actual expenses are higher than £1,000, you’ll pay less tax by deducting expenses instead of using the allowance.

Can the trading allowance create a tax loss I can carry forward?

No, the trading allowance cannot be used to create a loss. If your gross income is £800, you won’t pay tax. You can’t claim a £200 loss to offset against future income.

Has the trading allowance changed for 2026/27?

The trading allowance remains at £1,000 for the 2026/27 tax year. It has been set at this level since its introduction in April 2017, and there are no announced changes.

Is the trading allowance the same as the property income allowance?

No, they are separate allowances. The £1,000 property income allowance applies to rental or letting income (for example, renting out a house), while the £1,000 trading allowance applies to self-employment and casual work income. If you have both types of income, you may be able to benefit from both allowances.

In summary – important points to remember

• You can’t use the trading allowance if you’re already self-employed with a different business
• You can’t create a loss using the trading allowance
• You must choose either the trading allowance or actual expenses – you can’t use both
• The decision to use the trading allowance or actual expenses must be made for the whole tax year
• The allowance applies to gross income before any expenses or costs are deducted

The examples in this article illustrate how to structure income and the trading allowance tax efficiently. If you would like to learn more about the allowance, click on the HMRC link below:

Tax-free allowances on property and trading income – GOV.UK

Other resources:

Do I need to pay tax on my side hustle?

Disclaimer: This article is for general information only and reflects HMRC rules for the 2026/27 tax year. It does not constitute personal tax advice. Tax rules can change, and their effect depends on your individual circumstances. If you are unsure whether the trading allowance applies to your situation, please consult a qualified tax adviser or contact HMRC directly.