{"id":1550,"date":"2024-01-09T00:00:00","date_gmt":"2024-01-09T00:00:00","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/allowances\/trading-income-allowance\/"},"modified":"2025-05-22T13:12:17","modified_gmt":"2025-05-22T13:12:17","slug":"trading-income-allowance","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/allowances\/trading-income-allowance\/","title":{"rendered":"Trading allowance for business owners and landlords"},"content":{"rendered":"\n

When you\u2019re just starting out in your business, it can be difficult to know when, how, and where you need to pay tax. Luckily, the trading allowance gives you one less thing to worry about at the beginning.<\/p>\n\n\n\n

This tax-free allowance is available to business owners and landlords who have an annual income of less than \u00a31,000. It\u2019s also two separate allowances \u2013 so if you\u2019re a landlord who also runs a business, you\u2019re able to get both.<\/p>\n\n\n\n

Keep reading to learn everything from how the trading allowance works with business expenses to how being paid in cash affects your income.<\/p>\n\n\n\n

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What is the trading income allowance?<\/h2>\n\n\n\n

The trading allowance, or the trading income allowance, is a tax exemption for business owners. Put simply, the trading allowance means you don\u2019t need to report any earnings up to \u00a31,000 a year<\/strong> \u2013 or pay tax on them.<\/p>\n\n\n\n

This applies to sole traders, small business owners, or those running a side hustle<\/a> \u2013 which in itself can include things such as babysitting, gardening, or minor handyman work you\u2019re paid for. Basically anything that provides you income.<\/p>\n\n\n\n

However, even if you\u2019re not earning more than \u00a31,000, it\u2019s still important to keep accurate records of your income in case HMRC ever needs to see them. This will also be beneficial if your business takes off and you find yourself earning more than \u00a31,000 in a year.<\/p>\n\n\n\n

Before you claim the trading income allowance, you should remember that you\u2019ll be unable to deduct any other business expenses or allowances after claiming.<\/p>\n\n\n\n

It\u2019s also worth remembering that the trading allowance is different from the personal allowance, which is the amount employees can earn before paying tax through PAYE. The trading allowance applies only to business owners.<\/p>\n\n\n\n

What is property income allowance?<\/h2>\n\n\n\n

The property income allowance is another tax exemption for those who earn income from land or property \u2013 offering a tax-free allowance up to \u00a31,000. And if you own property jointly with another person, you\u2019ll both be eligible for the allowance dependent on your share of the rental income.<\/p>\n\n\n\n

This means that if your annual gross income from your property is \u00a31,000 or less, you won\u2019t need to inform HMRC. If your property income is higher than this, you’ll need to register for Self Assessment and start paying tax.<\/p>\n\n\n\n

However, it\u2019s important to note that the property trading allowance doesn\u2019t include those who rent a room in their own home.<\/p>\n\n\n\n

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What if I earn more than \u00a31,000?<\/h2>\n\n\n\n

Once your business earns more than \u00a31,000 in one tax year, you\u2019ll need to register with HMRC for Self Assessment \u2013 and file your tax return every year moving forwards.<\/p>\n\n\n\n

If your income is more than \u00a31,000 in one tax year, then you can choose to deduct the trading allowance rather than other expenses<\/a> or allowances<\/a>. If you do this, you can deduct up to \u00a31,000 \u2013 but not more than the total amount of your income.<\/p>\n\n\n\n

For example, if your business earns \u00a31,500 in one tax year, you can choose to claim the trading allowance in order to make your taxable income only \u00a3500. This gives you the opportunity to either:<\/p>\n\n\n\n