The £1,000 trading allowance explained
The £1,000 trading allowance is one of the most useful — and most misunderstood — reliefs for anyone with a side income. Here is exactly how it works.
Under £1,000: you may not need to tell HMRC
If your gross trading income for a tax year is £1,000 or less — that is your takings before any expenses, added up across all your trades — you may not have to report it at all. HMRC calls this full relief. It is why casual sellers and very small side hustles often have nothing to do. You can read the rule on HMRC's page, Tax-free allowances on property and trading income.
The £1,000 is measured on your gross income before expenses, and it is a single £1,000 across all of one person's trades — not £1,000 per platform or per side gig.
Over £1,000: allowance OR expenses, not both
Once your gross trading income goes above £1,000, you have a choice for working out your taxable profit. You can either:
- Deduct the £1,000 allowance from your income and pay tax on the rest (this is 'partial relief'); or
- Deduct your actual allowable expenses in the normal way.
You cannot do both on the same income. The sensible approach is to compare the two and use whichever leaves the lower taxable profit: if your real expenses come to less than £1,000, the allowance wins; if they come to more, claim your actual costs instead.
The trading allowance cannot be used to create a loss — it can only reduce your profit to zero, not below. And there is a separate £1,000 property allowance for rental income, which works the same way but is counted separately from the trading allowance.
When you must register for Self Assessment
If your gross income for a tax year is more than £1,000, you must register for Self Assessment by 5 October in the following tax year. For income earned in 2026/27, that registration deadline is 5 October 2027. Registering does not necessarily mean you owe tax — but you do need to be in the system to declare and let the figures decide.
A quick worked example
- You make £2,400 from a side hustle and spent £250 on materials. Claim the £1,000 allowance — taxable profit £1,400 — because £1,000 beats your £250 of real costs.
- You make £2,400 but spent £1,600 on stock and postage. Claim your actual expenses — taxable profit £800 — because £1,600 beats the £1,000 allowance.
Sources: HMRC 'Tax-free allowances on property and trading income' and the SA103S notes on gov.uk. General information, not tax advice — a few situations (such as claiming certain losses or paying voluntary National Insurance) mean you must still register even under £1,000, so check your own position.
General information, not tax or financial advice. Always confirm your own position with HMRC or a qualified adviser. This article was last checked against published gov.uk guidance on 13 July 2026. Rules and figures can change — always confirm your own position with HMRC or a qualified adviser.