What the Trading Allowance covers in 2025/26
The trading allowance is a £1,000 tax-free allowance for "miscellaneous trading or casual self-employment income". It applies to:
- eBay/Vinted/Depop selling beyond personal items.
- Etsy and craft income.
- Casual freelance work (writing, design, photography).
- Tutoring and coaching outside of regulated employment.
- Affiliate marketing and small content monetisation.
- Gardening, cleaning, dog-walking, and small services.
- Driving for delivery apps below £1,000/year (above this, full self-employment rules apply).
If your gross trading income is £1,000 or less, you do not need to register for self-assessment, do not need to report it, and pay £0 tax on it. This is the "full relief" option and is the simplest for occasional sellers.
If income is above £1,000, you choose between:
- Partial allowance method — deduct a flat £1,000 from gross income, pay tax/NI on the remainder. No need to track expenses. Best when actual expenses are below £1,000.
- Actual expenses method — deduct genuine allowable business expenses (cost of goods, postage, fees, mileage, home office). Best when expenses exceed £1,000.
You cannot claim both for the same income source. The allowance is per person per tax year and applies to your total trading income across all such activities (e.g. eBay + Etsy combined, not £1,000 each).
How the Trading Allowance interacts with other income
The trading allowance does not reduce your Personal Allowance or interact with savings/dividend allowances — it sits separately in the self-assessment calculation. Trading profits (after the allowance or actual expenses) stack on top of salary/pension to determine your marginal rate.
Examples of stacking:
- Employee earning £30,000 + £2,500 of eBay sales: trading profit £1,500 (after £1,000 allowance), taxed at 20% = £300, plus Class 4 NI 8% × £1,500 = £120 (assuming over £12,570 trading threshold — actually this is shared with employment, more nuanced; in practice combined £31,500 would all be over PA so NI may apply).
- Self-employed sole trader £35,000 + £800 eBay: £800 within £1,000 allowance, £0 extra tax. Self-employment continues normal rules.
Important interaction with Property Allowance: The £1,000 trading allowance and the £1,000 property income allowance are separate. You can use both in the same tax year if you have both types of income — total £2,000 of tax-free relief.
Cannot combine with other reliefs: If you use the trading allowance, you cannot also claim simplified flat-rate expenses, capital allowances, or rent-a-room scheme on the same income source.
Three worked examples (UK 2025/26)
Example 1: eBay seller, £900 income — no reporting
Sophie sells unwanted clothes plus her handmade earrings on Vinted/Etsy, totalling £900 of gross income in 2025/26.
Calculation: £900 within £1,000 allowance. £0 tax. No self-assessment needed. Sophie keeps the £900 fully tax-free.
Example 2: Etsy crafter, £4,500 income — partial allowance vs actual
Riley makes ceramics, gross sales £4,500, postage and materials cost £700. Basic-rate employed (40k salary).
Comparison: Partial allowance: profit £4,500 − £1,000 = £3,500 × 20% = £700 tax. Actual expenses: profit £4,500 − £700 = £3,800 × 20% = £760. Partial allowance wins by £60 because actual expenses (£700) are below £1,000. Plus Class 4 NI £3,500 × 8% = £280 either way (small margin difference). Riley registers for SA and uses partial allowance.
Example 3: Photographer side-hustle, £8k income with £2,500 expenses
Tom does weekend wedding photography, £8,000 gross, expenses £2,500 (camera depreciation, software, mileage). Higher-rate £75k salary.
Comparison: Partial allowance: profit £7,000 × 40% = £2,800 + NI 2% (above UEL) £140 = £2,940. Actual expenses: profit £5,500 × 40% = £2,200 + 2% £110 = £2,310. Actual expenses saves £630 because expenses (£2,500) exceed £1,000.
Common mistakes to avoid
- Believing you don't need to register if income is under £1,000 but expenses are higher — true, no registration needed; you simply lose the loss for tax purposes.
- Combining trading allowance with actual expenses — must choose one or the other per source.
- Forgetting the trading allowance is per person per year (across all trading sources), not per source.
- Confusing the trading allowance with Self Employed Allowance or with the property income allowance — three separate £1,000 allowances exist (trading, property, and the now-discontinued rent-a-room separate at £7,500).
- Not registering for self-assessment by 5 October following the year — penalty applies.
- Believing eBay sales of personal possessions count — selling personal items at less than original cost is NOT trading income (no tax) and does not use the allowance.
- Trying to use both trading allowance and rent-a-room scheme — different reliefs but you can't combine on the same letting income.
When to use this calculator
Run this calculator at any point in the year if you start a side-hustle, sell on Etsy/eBay/Vinted regularly, take cash for casual work, or freelance occasionally. Re-run quarterly if income grows. Use it to decide whether to track expenses (administratively cheaper to use the £1,000 allowance) or to keep receipts (saves more tax once expenses exceed £1,000). Couples both running side-hustles each get their own £1,000 — no joint cap.
Regional differences (Scotland, Wales, Northern Ireland)
Most allowances and reliefs are UK-wide. The Personal Allowance (£12,570), Marriage Allowance (£1,260 transferable), Blind Person's Allowance (£3,070), trading allowance (£1,000), property allowance (£1,000), Child Benefit, and Tax-Free Childcare apply identically in England, Scotland, Wales, and Northern Ireland. Scotland has different income tax bands (Starter 19%, Basic 20%, Intermediate 21%, Higher 42%, Advanced 45%, Top 48%), so the Marriage Allowance saves £252 in rUK and a slightly different amount in Scotland because the basic-rate gain is at 20% (Scottish Basic Rate). Personal Allowance taper at £100k+ applies UK-wide.