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Trading allowance calculator

Check whether the £1,000 trading allowance or your actual expenses gives you the lower taxable profit, and whether you need to register for Self Assessment. Useful for a side business or your first year of trading.

How the trading allowance works

The trading allowance is a tax exemption of up to £1,000 a year for individuals with income from self-employment, casual services such as gardening, or hiring out personal equipment such as power tools. If your gross trading income is £1,000 or less, you usually don't need to tell HMRC. Above £1,000, you can deduct the £1,000 allowance instead of your actual expenses, but you can't do both. If your expenses are more than £1,000, claiming them is usually better (GOV.UK, checked 15 October 2026).

You can't use the allowance in a tax year when you have trading income from a company or partnership that you or someone connected to you controls, or from your own employer or your spouse's or civil partner's employer. It doesn't apply to partnership income (GOV.UK).

Do you need to register?

You must send a tax return if you were self-employed as a sole trader and earned more than £1,000 before taking off anything you can claim tax relief on. You must tell HMRC by 5 October after the tax year if you haven't sent a return before (GOV.UK). In 2025 the government announced plans to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000 gross within this Parliament. No start date had been set when we checked, and the £1,000 tax-free allowance itself isn't changing (GOV.UK).

Once you're past the allowance, work out the tax with the self-employed tax calculator, and claim the costs you're owed with the mileage and working from home calculators. If your income is growing, check when Making Tax Digital applies and keep track with a free invoicing app.

Based on GOV.UK, checked 15 October 2026. Not tax advice.

Questions

What is the trading allowance?

A tax exemption of up to £1,000 a year on trading income for individuals, for example from a side business, casual work or hiring out tools.

Can I claim the trading allowance and expenses?

No. If your income is over £1,000 you choose one: the £1,000 allowance or your actual expenses.

Do I need to register as self-employed if I earn under £1,000?

Usually not, but you can, for example to claim a loss, pay voluntary Class 2 NI or prove you're self-employed for Tax-Free Childcare.

Is the threshold going up to £3,000?

The government announced in 2025 that the Self Assessment reporting threshold for trading income will rise to £3,000 within this Parliament. No start date had been set when we checked on 15 October 2026, and the £1,000 tax-free allowance isn't changing.