What is the trading allowance?
The trading allowance lets you earn a set amount of income from self-employment, casual work or a side hustle each year without paying tax on it. If your trading income is within the allowance, you generally do not need to register or declare it. Above it, you can deduct the allowance instead of expenses.
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Check what you're owed →The trading allowance was introduced to keep small amounts of casual and side-hustle income out of the tax system. If your total income from things like selling crafts, occasional freelancing or odd jobs stays within the allowance, you usually do not have to tell HMRC about it, which removes a lot of paperwork for people earning only a little on the side.
If your trading income goes above the allowance, you have a choice. You can deduct the trading allowance from your income instead of claiming your actual business expenses, which is simpler and often better if your expenses are low. Alternatively, you can ignore the allowance and deduct your real expenses in the usual way if they are higher.
The allowance is a fixed annual figure that can change, so check the current amount on GOV.UK. It is a useful relief for the growing number of people with side incomes, but once you cross the threshold you do need to register and report, so it is worth keeping an eye on your totals as your activity grows.
How to use the trading allowance
- Add up your trading income. Total your income from self-employment, casual work and side hustles for the tax year.
- Compare to the allowance. Check whether your total is within the allowance, in which case you may not need to declare it.
- Choose allowance or expenses. If you go over, decide whether deducting the allowance or your actual expenses gives the better result.
- Register and report if needed. If you exceed the threshold, register with HMRC and report the income through Self Assessment.
Frequently asked questions
- Do I need to declare income within the allowance?
- Usually not. If your trading income stays within the allowance and you have no other reason to file, you generally do not need to register or declare it.
- What happens if I earn more than the allowance?
- You must report the income, and you can either deduct the trading allowance instead of expenses or claim your actual expenses, whichever is better.
- What kind of income does it cover?
- Income from self-employment, casual work and side hustles, such as freelancing, selling goods you make, or occasional services.
- Can I use it alongside actual expenses?
- No. For a given source you either deduct the trading allowance or your actual expenses, not both at the same time.
MoneyFinder is an independent sign-posting service that helps you find financial support you may be entitled to. We are not a government body and do not provide financial advice. Figures are taken from the official sources cited above and were correct when last checked — always confirm current details on the linked GOV.UK pages.