The £1,000 trading allowance or your real expenses? Three side-job tradespeople worked through

GOV.UK describes a trading allowance of up to £1,000 a year for people with self-employment income, which includes casual services. Instead of listing expenses, you deduct the allowance. The catch is simple: you cannot do both. For a tradesperson with a few weekend jobs it can save paperwork. For anyone who buys materials, fuel and tools it usually does not.

What the page says

• The allowance is "up to £1,000 a year". If your gross trading income is £1,000 or less, you have full relief and do not need to tell HMRC.
• If income is above £1,000 you have partial relief: you can deduct up to £1,000, but not more than the amount of your income.
• If you use the allowance, you "cannot deduct any other expenses or allowances".
• You cannot use it for income from a company you or someone connected to you owns or controls, or from a partnership where you or someone connected to you are partners. It also excludes income from your employer or your spouse's or civil partner's employer.
• GOV.UK says to register for Self Assessment if gross trading income is over £1,000. For income between £1,000 and £2,500 it points you to contact HMRC.

Three people, same income, different expenses

All three are invented, each with £6,000 of income from weekend jobs. The sums are ours.

The rule falls straight out of the arithmetic: use whichever is bigger, £1,000 or your actual allowable expenses. A tradesperson who buys £30 of fixings a week for 50 weeks has spent £1,500 and should claim expenses. Someone who only uses a few hand tools they already own may be under £1,000.

Where it does not fit

Most firms in this trade will not suit it. A van, insurance, tools and materials push a full-time tradesperson well over £1,000 in expenses, and the allowance is capped at £1,000 whatever the income. Under the page's rules you also cannot use it for partnership income, so a two-person firm trading as partners is out. If you claim van mileage on the flat rate, see our van mileage guide, because those costs count as expenses, which the allowance rules out.

An idea that comes up on forums is to put some income, such as scrap, through a separate "side business" to claim a second allowance. The point is covered in our scrap copper guide.

What we could not confirm from the page: how a CIS deduction taken by a contractor sits alongside the allowance, and what happens when you also have employed income. Ask HMRC or an accountant. For the wider tax bill dates, see the 31 January 2027 guide, and keep your income records for the period in how long to keep invoices and records.

Overlyft can set up an expenses assistant that reads your receipts and bank feed each week, tags each one as materials, fuel or tools, and keeps a running total against the £1,000 line, so you know by January which method you should choose. You check the totals before you file.

This is general information, not tax advice. If you are a partner, a CIS subcontractor or also employed, ask an accountant.