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Trading Allowance

[ˈtreɪdɪŋ əˈlaʊəns]



The Trading Allowance is a tax-free £1,000 for 2023/24 that self-employed individuals can claim. It cannot be deducted alongside actual business expenses.

More detail:

The Trading Allowance is the amount of income that a Self-employed individual can make before paying Income Tax in the United Kingdom. It was introduced in 2017 to simplify taxes for small businesses and Sole Traders.

The Trading Allowance for the 23/24 Tax Year is a tax-emption of up to £1000 for individuals with trading income from Self-employment, casual services like babysitting, or renting out personal personal equipment. They must use Cash Basis accounting or at least be eligible to use it.

If an individual earns under £1000 of trading income in a year, they are not required to inform HMRC and the money is tax-free.

If an individual earns more than £1000 of trading income, they must tell HMRC. They can can choose to deduct the Trading Allowance instead of deducting their actual business expenses. However, if business expenses are greater than £1000, it will be more Tax-efficient to forfeit the Trading Allowance and deduct business expenses instead.

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