The trading allowance is a UK tax relief that makes the tax process simpler for small business owners and people with side jobs. It lets you earn a specific amount from trading activities without having to declare the income or pay tax on it.

Knowing the ins and outs of the trading allowance can help you manage your finances better and give you a broader understanding of what you are and aren't entitled to.

What is the trading allowance?

The trading allowance is a tax exemption in the UK that lets you earn up to a certain amount from casual trading activities, without having to report the income to HMRC or pay tax on it.

It was introduced in 2017 with the aim of reducing the amount of admin for small traders and casual earners. It has simplified the tax process and sets out a clear threshold.

How much is the trading allowance?

For the tax year 2024/25, the trading allowance is £1,000. This means that if any trading activities you have made throughout the year come in below £1,000, you don’t have to declare this to HMRC or pay tax on it.

If your income passes £1,000, you must fill out a Self Assessment tax return or declare the income to HMRC.

Who can claim the trading allowance?

There are plenty of people who can claim the trading allowance. A few key examples include:

  • Self-employed

If you own a small business that earns less than £1,000 per tax year.

  • Side workers

If you have a primary job but earn an income of less than £1,000 from another source, such as freelancing.

  • Construction workers

If you’re claiming the construction industry scheme tax rebate you can also benefit from the trading allowance.

  • Casual service providers

If you provide casual services – babysitting or gardening for example.

  • Online sellers

If you sell items or services through online platforms.

How to claim the trading allowance

Depending on whether you earn more than the threshold — £1,000 in 2024/25 — there are two ways to claim the trading allowance.

1) If you haven’t earned over the threshold

If your trading income isn’t above £1,000 then you don’t have to do anything. You can keep 100% of the income you have earnt, without having to declare it or pay tax on it.

2) If you have earned over the threshold

If your trading income exceeds £1,000, then you must complete a Self Assessment tax return. When you fill out the return, simply enter your gross income and subtract the trading allowance. This indicates you are making this claim.

Get in touch with us for help

Understanding and taking advantage of the trading allowance can allow you to maximise your earnings from all of the work you do each year. If you have any questions about the trading allowance and how it affects your tax return, get in touch with us and our team of experts will be happy to help.

Trading allowance - FAQs

Is trading allowance in addition to personal allowance?

Personal Allowance and trading allowance are different types of tax reliefs, so both can run at the same time. Personal Allowance is the amount of money you’re allowed to earn in a tax year before you pay Income Tax on it.

Is it better to claim trading allowance or expenses?

You can’t claim both the trading allowance and expenses when filling out a Self Assessment tax return, so you need to choose one depending on your personal circumstances. If your allowable expenses are less than £1,000 then it’s likely better to claim the trading allowance. If your allowable expenses are more than £1,000 then you might be better off deducting your expenses.

How much can I earn self-employed without declaring?

You can earn up to £1,000 from self-employment before declaring this income to HMRC. It also means you don’t have to pay tax on this amount as part of the trading allowance