What is the £1,000 trading allowance?
Figures checked on 26 October 2026 for the 2026/27 tax year. We re-check them each April.
If you earn a bit on the side, one number matters more than any other: £1,000. Below it, you can usually ignore HMRC. Above it, you register, and you get a choice that can save you tax or quietly cost you more. This is how it works, with the sums.
What the allowance is
The trading allowance is a tax exemption of up to £1,000 a year. It covers income from self-employment, from casual services such as babysitting or gardening, and from hiring out your own equipment, such as power tools. It has applied since 6 April 2017.
The line is gross income, not profit
The test looks at what you were paid before costs. Sell £1,200 of handmade items after spending £900 on materials and your profit is £300, but your gross trading income is £1,200. You are over the line.
Gross trading income means everything you were paid for the work in the tax year, from 6 April to 5 April, before you take off any costs.
If you are at or under £1,000
- You generally do not need to tell HMRC. gov.uk calls this full relief.
- You must still keep a record of the income. Invoices, a spreadsheet, bank statements or an appointment diary all count.
- You might register anyway: to claim relief for a loss, to pay voluntary Class 2 National Insurance, or to claim Tax Free Childcare or Maternity Allowance based on your self-employment income.
If you are over £1,000
You must register for Self Assessment by 5 October after the end of the tax year. Then, for that year, you choose one of two ways to work out your taxable profit:
- Use the allowance. Take £1,000 off your gross income, instead of your actual costs. It can never be more than your income.
- Use your actual costs. Take off what you really spent on the work, as normal.
You cannot do both. In plain terms, take off whichever is bigger: £1,000 or what you really spent. Work it through for your own year, because the answer can go either way.
A small year: £800 paid
| Gross trading income | £800 |
|---|---|
| Over £1,000? | No |
| Tell HMRC? | Generally not. Keep the record. |
Nothing to work out. The allowance covers it.
£1,800 paid, £350 of costs
| Using the allowance | £1,800 − £1,000 = £800 taxable profit |
|---|---|
| Using your costs | £1,800 − £350 = £1,450 taxable profit |
The allowance is better here, by £650 of taxable profit.
£3,000 paid, £1,400 of costs
| Using the allowance | £3,000 − £1,000 = £2,000 taxable profit |
|---|---|
| Using your costs | £3,000 − £1,400 = £1,600 taxable profit |
Your costs are better here, by £400. This is why you keep receipts.
£1,200 sold, £900 of materials
| Profit before anything else | £1,200 − £900 = £300 |
|---|---|
| Over £1,000 gross? | Yes, so you register |
| Using the allowance | £1,200 − £1,000 = £200 taxable profit |
| Using your costs | £1,200 − £900 = £300 taxable profit |
A £300 profit still puts you over the line, because the test is gross. Even so, the allowance gives the lower figure.
Taxable profit is not the tax bill
The figure you end up with is added to your other income. For 2026/27 in England, Wales and Northern Ireland, the first £12,570 of your income is covered by the Personal Allowance, and the basic rate is 20% on income from £12,571 to £50,270. Scotland has different bands.
So £800 of taxable profit on top of a salary that already uses your Personal Allowance, for a basic-rate taxpayer, is taxed at 20%: £160. For someone with little other income it may be nothing at all.
Who cannot use it
gov.uk says the allowance does not apply to:
- income from a partnership, or from a partnership where you or someone connected to you is a partner
- income from a company that you or someone connected to you owns or controls
- income from your employer, or from your spouse's or civil partner's employer
If one of these might apply to you, ask HMRC before you rely on the allowance.
More than one side hustle?
gov.uk's guidance does not spell out how the £1,000 is shared across several kinds of trading. Treat it as one limit across all your trading income, and check with HMRC if you are close to it. Income from property has its own separate £1,000 allowance.
What to do this year
- Add up what you have been paid so far this tax year, before costs.
- Keep a simple record: the date, who paid you and how much.
- Keep receipts for what you spend on the work, in case your costs beat the allowance.
- If you are over £1,000, register for Self Assessment by 5 October after the tax year ends, then compare the two methods.
The trading allowance checker runs the comparison for you. Which tax year a payment belongs to settles the 5 April edge, and what you can claim lists the costs that count.
Using the allowance can affect how some income is counted for tax credits, the High Income Child Benefit Charge, student loan repayments and Married Couple's Allowance. If any of those apply to you, read the gov.uk page below before you choose.
Sources: Tax-free allowances on property and trading income; Income Tax rates and Personal Allowances. This is general information, not tax advice. SideTill is not tax software and does not file anything with HMRC.
Questions
Does the trading allowance mean I never pay tax on £1,000?
Not exactly. At £1,000 or less you generally do not need to tell HMRC. Over it, the allowance is a deduction you can use instead of your costs, so you pay tax on what is left, after your other income and the Personal Allowance are taken into account.
Do I have to register if I earned exactly £1,000?
gov.uk says that if your gross trading income is £1,000 or less you generally do not need to tell HMRC, and that you must register if it is over £1,000. Exactly £1,000 is covered. You must still keep records.
What if I made a loss?
You can only claim relief for a loss by registering and filing a return, so a loss is a reason to register even if you are under £1,000. gov.uk points to HMRC helpsheet 227 for more on losses.