# The trading allowance

Canonical: https://taxmo.co.uk/self-assessment-guide/trading-allowance
Part of: [Self Assessment topics](https://taxmo.co.uk/self-assessment-guide)

The trading allowance is a tax exemption for individuals with a small amount of trading income. The current amount is on our UK tax rates page, labelled with its tax year, and on GOV.UK.

## If your income is within the allowance

If your gross trading income for the tax year is no more than the allowance, GOV.UK says you do not usually need to tell HMRC about it. GOV.UK lists the exceptions on its trading allowance page. Gross means before expenses.

## If your income is more than the allowance

If your gross trading income for a tax year is more than the allowance, you must register for Self Assessment. You can then choose to deduct the allowance from your income instead of deducting your actual expenses.

## The allowance or your expenses, not both

You cannot deduct any other expenses or allowances if you claim the trading allowance. If your real costs are higher than the allowance, claiming expenses usually gives a lower profit.

## When you cannot use it

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

- A company you or someone connected to you owns or controls
- A partnership where you or someone connected to you is a partner
- Your employer, or your spouse's or civil partner's employer

## Common mistakes

- Measuring income against the allowance after expenses. The test uses gross income.
- Claiming the allowance and expenses for the same income.
- Not registering when gross income goes over the allowance.

## Sources

- [GOV.UK, Tax-free allowances on property and trading income](https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income)

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Checked against GOV.UK on 6 November 2026. Rules and figures change, so verify on GOV.UK before you rely on this. General information, not tax advice.