Home / Glossary / Trading allowance
What is Trading allowance?
Last verified 31 October 2026
The trading allowance is a tax-free allowance of up to £1,000 a tax year for trading income, such as casual services or hiring out personal equipment. A separate £1,000 property allowance applies to property income.
Why it matters to landlords
If your gross trading or property income is £1,000 or less, you generally do not need to tell HMRC or declare it on a return, but you must keep records. If it is more than £1,000, you can deduct up to £1,000 instead of claiming actual expenses. The deduction cannot create a loss. Joint owners can each claim the property allowance against their share of the rent.
Some income is excluded: income from a company or partnership you or a connected person controls, and income from your employer. The property allowance cannot be used if you claim the finance cost tax reducer for a residential property, or for Rent a Room income. Under MTD, HMRC says you must create digital records if you claimed the allowance on your last Self Assessment return, and the allowance is applied as an adjustment after your fourth update.
Example
Harriet earns £1,800 hiring out her scaffolding tower, with no other costs. She deducts the £1,000 allowance and has £800 of taxable trading profit. Her neighbour Ben earns £900 from a similar sideline and does not need to declare it, but keeps his records.
Self-Employed Expenses: Simplified Rates or Actual Costs? →