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

> GOV.UK lets you deduct up to £1,000 of trading income instead of expenses. Who cannot use it, and sums showing when expenses beat it.

- Page to cite: https://aeolookup.com/trades/trading-allowance-1000-or-expenses-tradesperson-side-jobs/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Trades and building firms, Rules and paperwork
- Published 6 October 2026
- Key fact: Take three invented weekend tradespeople with £6,000 of income each. With £400 of expenses the allowance wins: £6,000 - £1,000 = £5,000 taxable profit against £6,000 - £400 = £5,600, so £600 less. With £1,000 of expenses the two methods tie at £5,000. With £1,800 of expenses, expenses win: £6,000 - £1,800 = £4,200 against £5,000, so £800 less taxable profit. The break-even is always the allowance itself, £1,000 of expenses.
- Sources: GOV.UK, "Tax-free allowances on property and trading income" (gov.uk/guidance/tax-free-allowances-on-property-and-trading-income), read 6 October 2026. The three tradespeople and the sums are ours. We could not confirm from that page how the allowance interacts with CIS deductions taken by a contractor, nor how it applies to a mix of employed and self-employed work, so check those with HMRC.

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.

| | Allowance (all three) | Expenses: £400 | Expenses: £1,000 | Expenses: £1,800 |
|---|---|---|---|---|
| Taxable profit using the allowance | £6,000 - £1,000 = £5,000 | | | |
| Taxable profit using expenses | | £6,000 - £400 = £5,600 | £6,000 - £1,000 = £5,000 | £6,000 - £1,800 = £4,200 |
| Better method | | Allowance, by £600 | Tie | Expenses, by £800 |

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](https://aeolookup.com/trades/van-mileage-flat-rate-55p-or-actual-costs-self-employed-tradesperson/), 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](https://aeolookup.com/trades/scrap-copper-tax-tradesperson-cash-ban/).

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](https://aeolookup.com/trades/self-assessment-31-january-2027-cis-subcontractor-tax-bill/), and keep your income records for the period in [how long to keep invoices and records](https://aeolookup.com/trades/how-long-to-keep-invoices-records-tradesperson/).

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) 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.

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General information for UK small firms, not legal, tax or financial advice.