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The Trading Allowance is a tax-free allowance worth £1,000 that most self-employed people can claim.
The Trading Allowance is very simple to use:
- If you earned under £1,000 from self-employment, it’s tax-free – you don’t even need to declare it or file a tax return
- If you earned over £1,000 but your expenses are under £1,000 (for example, you just spend a small amount on public transport), you can just claim this flat £1,000 instead – you don’t even need to worry about keeping receipts
- If your expenses are over £1,000 but you lost your receipts, you can still claim this easier £1,000 tax-free allowance
The only time you can’t claim the Trading Allowance is if you’re not using “cash basis“, but that’s rare.
Frequently Asked Questions
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Are tax allowances and tax reliefs the same thing?
No, not quite. An allowance is an amount that you can earn before you’re liable to pay tax on the earnings. A tax relief is something that you use to pay less tax (reduce your tax bill).
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How long should I keep my expenses receipts?
In the UK, you must keep all of your Tax Records (including expense receipts) for a minimum of 6 years. We recommend storing these digitally where possible to prevent them being lost! Even a scanned copy of a receipt can be a great way to keep things in order.
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