Claiming the trading allowance on your 2025/26 tax return

On your 2025-26 tax return the trading allowance is £1,000. If your gross trading income was £1,000 or less, it is covered in full and you usually do not need to report it. If it was more, you can deduct £1,000 instead of your real expenses, which you claim in box 10.1 of the short self-employment pages.

What is the trading allowance?

The trading allowance is a £1,000 tax-free allowance for income from self-employment, casual services and hiring out personal equipment. HMRC calls it the trading and miscellaneous income allowance. It has applied since 6 April 2017 under sections 783A to 783AR of the Income Tax (Trading and Other Income) Act 2005.

GOV.UK’s examples include babysitting, gardening and hiring out power tools. It applies to gross income, before expenses.

Full relief or partial relief?

The allowance works in one of two ways, depending on your gross income for 2025-26.

HMRC’s Business Income Manual says partial relief gives a taxable profit equal to the excess over £1,000, with no separate deduction for expenses or capital allowances. Income Tax and Class 4 National Insurance then apply to that profit.

Worked examples for 2025-26

• Sales of £850. Full relief applies. There is no tax and nothing to report, unless you need a return for another reason.
• Sales of £2,400, costs of £400. The allowance gives a profit of £1,400. Actual costs would give £2,000, so claim the allowance.
• Sales of £8,000, costs of £3,000. Actual costs give a profit of £5,000. The allowance would give £7,000, so claim expenses.
• Sales of £1,500, costs of £2,000. Claim expenses. The allowance cannot create a loss, and a loss may be useful later.

Who cannot claim the trading allowance?

You cannot use it in a tax year if any of your trading or miscellaneous income comes from an excluded source. HMRC’s BIM86030 says that if it does, you are not eligible on any of your trading income for that year. The exclusions are:

• a partnership where you or a connected person are a partner
• your employer, or your spouse’s or civil partner’s employer
• a close company that you or a connected person own or control
• a rent-a-room trade, such as a bed and breakfast in your own home

Income from your own partnership is also outside the allowance. Partners report on the partnership pages.

Do you have more than one trade?

You get one £1,000 allowance in total, not one per business. HMRC’s BIM86015 says individuals “have discretion about how they allocate the allowance between their different trades”.

The same allowance also covers miscellaneous income, such as one-off casual work. If you have a trade and miscellaneous income, the £1,000 is shared between them.

How to claim the trading allowance: step by step

1. Add up your gross income from all trades and casual work between 6 April 2025 and 5 April 2026.
2. Check the exclusions above. If any apply, the allowance is not available.
3. Compare the two methods. Work out profit using the £1,000 allowance and using actual expenses.
4. Pick the right pages. Most people claiming the allowance will use the SA103S short pages.
5. Enter turnover in box 9 and £1,000 in box 10.1. HMRC’s notes say you then cannot deduct allowable expenses or claim other allowances.
6. File online by 31 January 2027 and pay any tax due the same day.

HMRC’s manual says elections must be made by the first anniversary of 31 January after the tax year. For 2025-26 that is 31 January 2028, so you can still amend a return to switch method within that window.

When you might file even with full relief

Full relief is optional. You may want to opt out and report your income and expenses if:

• you made a loss you want to use
• you want to pay voluntary Class 2 National Insurance to protect your State Pension record
• you want to claim Tax-Free Childcare or Maternity Allowance based on self-employment

GOV.UK says you must register for Self Assessment in these cases. If your gross income was over £1,000, the registration deadline for 2025-26 was 5 October 2026.

What changes from April 2027?

Budget 2026 on 28 October 2026 confirmed that the trading allowance rises from £1,000 to £3,000 from the 2027-28 tax year. HMRC’s policy paper says the Self Assessment reporting threshold for trading income rises to £3,000 at the same time.

That does not help your 2025-26 or 2026-27 returns, which still use £1,000. See trading allowance triples to £3,000 and our guide to side hustle tax. If you sell through apps, also read what eBay, Vinted and Airbnb tell HMRC.

Frequently asked questions

How much is the trading allowance for 2025-26?

It is £1,000 of gross trading and miscellaneous income. It rises to £3,000 from 6 April 2027.

Which box do I use to claim the trading allowance?

On the SA103S short self-employment pages, enter turnover in box 9 and the trading allowance in box 10.1. Leave the expense boxes blank.

Can I claim the trading allowance and my expenses?

No. If you claim the allowance, you cannot deduct any other expenses or capital allowances for that income.

Do I get £1,000 for each business?

No. You get one £1,000 allowance across all your trades and miscellaneous income, and you can choose how to split it.

Can I use the trading allowance if I am also employed?

Yes, unless the trading income comes from your employer or your spouse’s or civil partner’s employer. Income from those sources rules out the allowance for that year.