What is the £1,000 Trading Allowance and how does it work?

The Trading Allowance is a £1,000 tax-free allowance for self-employed income. If your gross self-employment income is £1,000 or less in a tax year, you do not need to declare it to HMRC or file a Self Assessment return for that income. If your income exceeds £1,000, you have two options: 1. Claim the £1,000 allowance and pay tax on the excess (gross income minus £1,000) 2. Claim your actual business expenses instead of the allowance You choose whichever gives the larger deduction. In most cases, if you have significant expenses, it's better to claim those instead. Important: the Trading Allowance cannot be used alongside other allowable expense deductions in the same business — it's an either/or choice.

• First £1,000 of self-employment income: completely tax-free
• Under £1,000 income: no need to register or file a return for that income
• Above £1,000: choose between the £1,000 allowance or claiming actual expenses
• Pick whichever gives the largest deduction against your profits
• Cannot combine the allowance with other expense deductions in the same business