We offer a free tax return if your income is below £3,000. If you earn more, we charge a flat fee of £99.

What is the trading allowance?


One of the most time consuming parts of a tax return is getting everything in place to submit it. Bookkeeping is an 'always-on' activity and a big part of the (sometimes last minute!) tax return process.

Earnr makes bookkeeping fast and simple. We connect to your bank account so that you can select the income and expenses that relate to your business. But, if you are self-employed, there is an even easier way to do it. Introducing...the trading allowance (launched by HMRC).

What is the trading allowance?

The trading allowance exists to help those on lower incomes reduce unnecessary admin. It works in one of two ways and it allows anyone to:

  1. Earn £1,000 (that's total sales) from self-employment without submitting a tax return, or;
  2. Claim up to £1,000 in expenses without any evidence or records.

Unsure whether you've earned over £1,000? You can manage your business transactions in Earnr and view how much income you've made.

When should I use the trading allowance?

Once you've earned over £1,000, you have the choice of whether to use the trading allowance or not. It's a great approach to take in many scenarios:

  • You know you've spent less than £1,000. Declaring your expenses could result in a larger tax bill and will cost you time.
  • You have no record of the expenses you've incurred. You can save all the time and stress of compiling your records.
  • You have no receipts for your spending. HMRC need you to keep evidence of your spending if you wish to claim these as expenses. If you haven't kept these, using the allowance can keep you out of trouble.
  • You are short on time. Utilising the trading allowance can speed things up (especially with Earnr!)

When is it not worth it?

These are meaningful savings, but it is worth considering whether the time and stress is worth it. The trading allowance isn't for everyone. There are two scenarios where it is not useful:

  • You've incurred significant costs. If you report these expenses, you will most likely reduce your tax bill. For example, you run a product-focused business. Materials represent a significant cost. Most businesses selling something physical, will report their expenses.
  • You've made a loss. If your expenses are greater than your income, it's often worthwhile reporting your expenses and register this loss with HMRC. You can use a loss to offset your profit in another year and so save on taxes in the future.

If you want to make use of the allowance in the Earnr app, you can skip past the expense classification and head straight to the tax return. You can also choose between Trading Allowance and Expenses when completing the Self Employment details on the Tax tab.

Earnr automates your day-to-day business and finance admin so you have more time to focus on growing and creating. Earnr can automate your tax return in just 17 minutes. Visit the app store to get started today.

Download earnr