The £1,000 trading allowance, explained
The £1,000 trading allowance is a small tax-free buffer for people making a bit of money from a side activity, like reselling or making things to sell. If your trading sales for the year come to under £1,000, there's nothing to report and nothing to pay. One thing to clear up first: this is about trading, not about clearing out your own stuff, and the two are taxed very differently.
What it actually is
The trading allowance lets you earn up to £1,000 of gross trading income in a tax year without paying tax on it or telling HMRC. "Gross" means your sales before you take any costs off. It's one allowance per person, per tax year (6 April to 5 April), and it sits separately from your £12,570 personal allowance and from any wages from a job.
So if you did a bit of reselling on the side and your total sales for the year were £900, you're inside the allowance. Nothing to register, nothing to file.
It's for trading, not for selling your own things
This is the part that trips people up. Selling your own used belongings, clothes you've worn, the old furniture, the kids' outgrown things, isn't taxable income at all. There's no £1,000 limit on that, however much it adds up to.
The allowance only matters when you're trading: buying or making things mainly to sell them on at a profit. If you're not sure which side of that line you're on, the free checker walks you through it.
What happens when you go over £1,000
Once your gross trading sales for the year top £1,000, the allowance has done its job and you move into reporting territory. You'll usually need to:
- register for Self Assessment, by 5 October after the end of the tax year you went over, and
- file a return and pay any tax by the following 31 January.
Going over £1,000 doesn't mean you suddenly owe tax on everything. It means you now report it, and you're taxed on your profit, not your sales.
The choice: the £1,000 allowance or your actual costs
When you work out your taxable profit, you get a choice. You can knock off either the flat £1,000 allowance or your actual allowable costs (the stock, the selling fees, the postage), whichever comes to more. You can't use both, and you can't use the allowance to turn a profit into a loss.
What you'd actually pay
Tax is charged on the profit that's left, at your normal rate, once your £12,570 personal allowance is used up across all your income. If your trading profit and any other income stay under £12,570, there may be no income tax to pay, though you'd still report the trading. On profit above £12,570 you'd also pay Class 4 National Insurance, at 6 percent up to £50,270 and 2 percent above that. The checker does the rough sum for you.
The "£3,000 change" you keep hearing about
This is the one that gets reported wrong almost everywhere. The government plans to raise the point at which you have to fill in a full Self Assessment return, from £1,000 to £3,000 of gross trading income, and to add a simpler online service for paying any tax instead.
Wondering if any of this is even you?
Soldly asks a few plain questions and tells you straight: are you trading, are you over the £1,000 allowance, do you need to register, and roughly what you'd owe. Two minutes, no sign-up, nothing saved.
Check where I stand →Common questions
What is the £1,000 trading allowance?
It's a tax-free buffer of £1,000 of gross trading income (sales before costs) per tax year. If your trading sales for the year are £1,000 or less, you generally don't need to tell HMRC or register for Self Assessment.
Does the trading allowance apply to selling my own clothes?
It doesn't need to. Selling your own used possessions isn't taxable income at all, so there's no limit on it. The allowance matters when you're trading, meaning buying or making things to sell on for profit.
Can I claim the £1,000 allowance and my expenses?
No, it's one or the other. When working out your taxable profit you can deduct either the flat £1,000 allowance or your actual allowable costs, whichever is bigger, but not both.
Is the trading allowance going up to £3,000?
Not as a tax-free allowance. The plan is to raise the point at which you must file a Self Assessment return from £1,000 to £3,000 of gross income, with a simpler way to pay. It has no start date yet, and it changes how you report, not how much tax you owe. The £1,000 tax-free allowance stays at £1,000.