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Trading allowance


Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
tag-icon Tax Returns

Trading allowance


Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
tag-icon Tax Returns
imgtext

This guidance note looks at how the trading allowance of £1,000 which provides an income tax and class 4 National Insurance exemption for up to £1,000 of trading income each tax year. There is a comparable property allowance which is set out in the Property allowance guidance note.

Trading allowance ― the basics

The trading allowance is an exemption for individuals with £1,000 from income tax and Class 4 NIC on trading income and it also covers miscellaneous income from the provision of assets or services. The trading allowance is not available for companies.

The trading allowance and property allowance are mutually exclusive. Therefore, it is possible for the individual to have £1,000 of gross trading receipts (which must include miscellaneous receipts) and £1,000 of gross property receipts, and the entire £2,000 would be exempt from income tax.

The trading allowance is set at £1,000 and can only be amended by secondary legislation, meaning it is unlikely that the level of the allowance will be up-rated annually. As such, the value of the allowance is likely to be eroded over

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  • 03 Feb 2025 06:26

Home/ Tolley Tax Guidance/ Owner-Managed Businesses / Calculating trading profit and loss

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