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Self-employed3 min read

The trading allowance, or your expenses?

The trading allowance lets you knock the first £1,000 off your self-employed or casual income before tax. You choose: the £1,000 allowance, or your actual allowable expenses, whichever leaves less to be taxed. Not both on the same income.

Which one wins?

Rule of thumb: if your real costs are under £1,000, the allowance usually wins (and saves you keeping receipts); if they're well above it, claiming actual expenses does. For example, on £18,000 with £6,500 of costs, expenses leave £11,500 to be taxed versus £17,000 with the allowance. These are illustrations, not your numbers. You pick each tax year, and gov.uk or an accountant can confirm your case.

This is general information, not accounting or tax advice. An accountant or HMRC is the right source for your situation.

Ready to put this into action?

Next: payment on account, explained

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What Blooom watches for you here

Blooom keeps your side-income figures in view, so the £1,000 trading allowance is easy to weigh against your costs.

With a free account, Blooom keeps an eye on this for you — the watching is free.

This guide is general financial education, not personal advice. Always do your own research, and consider speaking to a regulated adviser for your specific circumstances.