The £1,000 trading allowance explained

The trading allowance is one of the most useful tax reliefs for anyone selling online or running a small side activity. It means the first £1,000 of your gross trading income each tax year is tax-free. Here is exactly how it works, who it helps, and when you still need to tell HMRC.

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What the trading allowance is

Introduced in 2017, the trading allowance lets individuals earn up to £1,000 of gross income from trading (and a separate £1,000 from property) each tax year without paying tax on it. ‘Gross’ means your total sales before deducting any expenses. You can read the official guidance on gov.uk.

Below £1,000: usually nothing to report

If your total trading sales for the tax year are £1,000 or less, you generally do not need to register for Self Assessment or declare the income — provided you do not already have to file a return for another reason. The allowance does this work for you automatically.

Above £1,000: choose allowance or expenses

Once your gross trading income exceeds £1,000 you may need to register for Self Assessment. When you file, you can either deduct your actual business expenses, or claim the £1,000 allowance instead — but not both for the same income. Most sellers pick whichever gives the lower tax bill. If your expenses are small, the flat allowance is often simpler.

What counts as ‘trading income’?

Trading income covers selling goods or services with the aim of making a profit — for example buying stock to resell, selling handmade items, or offering a service. Selling your own old personal possessions to declutter is generally not trading and sits outside these rules entirely. If you are unsure, our checker helps you tell the difference.

Frequently asked questions

Is the £1,000 trading allowance tax-free?
Yes. The first £1,000 of your gross trading income each tax year is tax-free, so if your total trading sales are £1,000 or below you usually have no tax to pay and nothing to report.
Can I use the allowance and claim expenses?
No — not on the same income. If your trading income is above £1,000 you choose either to deduct actual expenses or to use the flat £1,000 allowance, whichever is better for you.
Does the allowance apply to selling old belongings?
The allowance applies to trading income. Selling your own unwanted personal possessions is usually a private sale rather than trading, so the allowance is not normally relevant to it.
Do I need to register for Self Assessment at £1,001?
Generally yes. Once gross trading income exceeds £1,000 in a tax year you usually need to register for Self Assessment and declare the profit, even though the first £1,000 may still be covered by the allowance.
Is there a separate allowance for online selling?
No. There is one trading allowance of £1,000 for all your trading income combined, regardless of how many platforms or marketplaces you sell through.

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