Employment or other taxable income
Reg. 07380272 · England & Wales · Est. 2010
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Method Comparison
Trading Allowance
Actual Expenses
Registration Required
Your trading income exceeds the £1,000 trading allowance. You must register for Self Assessment with HMRC and file a tax return, even if you use the trading allowance as your deduction method.
Everything you need to know about the £1,000 trading allowance
What is the trading allowance?
The trading allowance is a £1,000 tax-free allowance for individuals with trading (self-employed) or miscellaneous income. If your total trading income is £1,000 or less, you don't need to tell HMRC about it, register for Self Assessment, or pay any tax on it. If your income is above £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses when calculating your taxable profit.
Should I use the trading allowance or claim actual expenses?
The right choice depends on how much you spend running your business. If your actual expenses are less than £1,000, the trading allowance gives you a bigger deduction and therefore a lower tax bill. If your actual expenses exceed £1,000, claiming actual expenses will save you more tax. You cannot use both — you must choose one method for each tax year. This calculator compares both methods to show you which is better.
Do I need to register for Self Assessment?
If your total trading income is £1,000 or less, you don't need to register for Self Assessment or tell HMRC about it at all — the trading allowance covers it automatically. If your trading income exceeds £1,000 but you want to use the trading allowance as your deduction (instead of actual expenses), you must still register for Self Assessment and file a tax return. You'll claim the £1,000 trading allowance on your return.
When to use each method
Trading Allowance: Best when your actual expenses are less than £1,000. No need to track receipts or keep detailed expense records for the trading income.
Actual Expenses: Best when your actual business expenses exceed £1,000. You'll need to keep receipts and records for at least 5 years. The trading allowance of £1,000 applies per individual, not per trade.
HMRC-Aligned: This calculator uses official HMRC rates and thresholds for the 2025/26 tax year. The trading allowance of £1,000 applies per individual, not per trade. If you have income from multiple trades, the allowance is shared across all of them. For complex situations, consult a qualified accountant.
This calculator uses official rates and thresholds from:
Last verified: February 2026 · Tax year 2025/26. Results are indicative — consult a qualified accountant for personalised advice.
Reviewed by M. Samiuddin Quadri, ACCA — Chartered Certified Accountant at Gladstone & Co. · Updated for the 2025/26 tax year.
Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms