We sort your Self Assessment for you. £149, all in.

Fast, effortless and 100% online.  Learn more

We sort your Self Assessment for you. £149, all in.

The Trading Allowance: how to do away with receipts

  • 2 min read
  • Last updated 27 Oct 2022

Perhaps you’ve just become self-employed and want to know when to file for Self Assessment? Or whether you’re entitled to any full or partial tax reliefs? 

Either way, you’ll want to read more for a complete breakdown of the Trading Allowance!

First of all, what is the Trading Allowance?

If you’re self-employed, you can get up to £1,000 each tax year without having to pay income tax or national insurance contributions. This is called the Trading Allowance.

In much simpler terms:

  • If you earn less than £1,000 from self-employment, it’s completely tax-free (no need to complete a tax return for this)
  • If your expenses are under £1,000, you can simply claim this allowance instead (it’s bigger and you don’t need to worry about receipts)
  • If your expenses are over £1000, you can use the Trading Allowance as a partial relief

⚠️ Bear in mind though, if you claim the Trading Allowance of £1,000, you won’t be able to claim any other self-employment allowances (like mileage, home office, etc.) and you won’t be able to claim business expenses. ⚠️ 

Who else can claim the Trading Allowance?

The Trading Allowance isn’t limited to those with a limited company. Here are some others who can claim the Trading Allowance:

  • Construction workers claiming the CIS tax rebate
  • People who provide casual services, i.e babysitting or selling a few items on eBay
  • If you’re renting out items, for example power tools

Landlords are usually entitled to a similar allowance on property income. This is also a cool £1000, so if you have both types of income, you’ll get a £1,000 allowance for each. Sounds good to us!

Do I need to submit a Self Assessment tax return to claim it?

Whether you submit a Self Assessment tax return depends on how much you earn from self-employment.

If your income from self-employment is under £1,000 and you don’t have another reason to file a tax return such as employment income over £100k, then no. You don’t even have to register for self assessment in this case.

On the other hand, if your gross trading income is over £1,000, then you will need to report this income to HMRC by completing a self assessment. 

On your Self Assessment, you should deduct the Trading Allowance and tick the box to ensure HMRC are aware that you are doing so.

TaxScouts Newsletter

Want regular tips from us?

Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.

"*" indicates required fields

Category
This field is for validation purposes and should be left unchanged.