Trading Allowance: Who Qualifies and What You Get
Learn how the Trading Allowance provides tax-free income for self-employed individuals and how to decide between this and claiming actual expenses.
The Trading Allowance is a tax relief for self-employed individuals that allows you to earn a certain amount of income without having to pay tax on it.
Who it's for
This scheme is for self-employed individuals who earn gross income from their trading activities.
What you get
You receive a £1,000 tax-free allowance on your trading income. This means you do not have to pay tax on the first £1,000 you earn from your self-employed work.
What it costs you
There is no cost to use this scheme. You manage it by claiming the allowance when you complete your tax return.
The catch to know
You cannot use this allowance and also claim your actual business expenses if the allowance is the larger amount. You must choose whether to deduct your actual expenses or use this fixed allowance, whichever is more beneficial for you.
How to apply
- Keep track of your total gross income from your self-employed work.
- Calculate whether your actual business expenses are higher or lower than the £1,000 allowance.
- Complete your tax return.
- Apply the allowance to your income as required by your tax filing.