What is the trading allowance?

The trading allowance for 2026/27

The trading allowance lets you earn up to £1,000 a tax year from small side income without paying tax on it. The 2026/27 tax year runs from 6 April 2026 to 5 April 2027.

It covers income from:

• self-employment
• casual jobs, such as babysitting or gardening
• hiring out your own things, such as equipment

There is a separate £1,000 property allowance for income from land or property. If you have both kinds of income, you can get £1,000 for each.

"Gross" means all the money you take in, before costs.

Allowance or expenses: which is better?

If your income is over £1,000, you choose one of these:

• take off the £1,000 trading allowance, or
• take off your actual business expenses (allowable costs).

You cannot do both. If you use the trading allowance, you also cannot claim capital allowances (tax relief on things like equipment you buy for the business).

Example 1: low costs. You earn £3,000 from dog walking and spend £400 on costs.

• Using the allowance: £3,000 minus £1,000 = £2,000 taxable profit.
• Using expenses: £3,000 minus £400 = £2,600 taxable profit.
• The allowance is better by £600 of profit.

Example 2: high costs. You earn £3,000 selling crafts and spend £1,800 on materials.

• Using the allowance: £2,000 taxable profit.
• Using expenses: £3,000 minus £1,800 = £1,200 taxable profit.
• Claiming expenses is better by £800 of profit.

The allowance can never take your income below zero. It can be up to £1,000, but not more than your income.

Who cannot use it

You cannot use the trading allowance in a tax year if you have any trading or property income from:

• a company you, or someone connected to you, owns or controls
• a partnership where you, or someone connected to you, are a partner
• your employer, or your spouse's or civil partner's employer

When you still need a tax return

Even if your income is £1,000 or less, you need to register for Self Assessment if you want to:

• claim tax relief for a loss
• pay voluntary Class 2 National Insurance
• claim Tax-Free Childcare based on self-employment income
• claim Maternity Allowance based on self-employment

You can still use the trading allowance on that return.

Deadline to register

If your gross trading income is more than £1,000, register for Self Assessment by 5 October after the end of the tax year. For income in 2026/27, that is 5 October 2027.

Keep records of what you earn, such as invoices, bank statements or a simple spreadsheet.

If you live in Scotland, Wales or Northern Ireland

The trading allowance is the same across the UK. In Scotland, any profit above the allowance is taxed at Scottish Income Tax rates, from 19% to 48% in 2026/27.

Related guides

• When do I need to register for Self Assessment?
• What are the Self Assessment deadlines?
• Do I pay tax on a side hustle?
• What is the penalty for filing a Self Assessment tax return late?
• What are payments on account?

Where these figures come from

• Tax-free allowances on property and trading income (HMRC)
• HS222 How to calculate your taxable profits (2026) (HMRC)
• Scottish Income Tax (GOV.UK)