What is the GBP1,000 trading income allowance for self-employed?

Full answer

The trading income allowance of GBP1,000 per year was introduced in Finance Act 2017 alongside the property income allowance. It applies to gross trading income -- your total sales or receipts before any expenses -- from self-employment, a trade, profession, or vocation, and also covers miscellaneous income such as casual earnings and income from providing assets or services online. Rule 1 -- full relief: if total gross trading income is GBP1,000 or less in a tax year, it is completely exempt from Income Tax and does not trigger a requirement to file a Self Assessment return solely because of that income. This is ideal for people selling on eBay or Etsy, doing occasional odd jobs, or running a small hobby business. Rule 2 -- partial relief: if gross income exceeds GBP1,000, you can elect to use the GBP1,000 allowance as a deduction instead of your actual expenses. This is beneficial only when actual business expenses are below GBP1,000. If your costs are higher, claim actual expenses. The allowance applies per person, not per trade -- so if you have two separate trades, the combined GBP1,000 must cover both (you cannot claim GBP1,000 for each). The allowance cannot create a loss. It cannot be used if you are claiming Universal Credit and reporting self-employment income (UC has its own surplus earnings rules). The trading income allowance applies across England, Scotland, Wales, and Northern Ireland and cannot be combined with Capital Allowances or loss relief in the same year if you elect to use the allowance. Elect the partial relief on the Self Employment pages (SA103) of your Self Assessment return by ticking the relevant box and reporting nil expenses.

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