How much can you trade tax-free?

How Much Can You Earn from Trading Without Paying Tax?

If you're trading as a sole trader or earning income from self-employment, you might be wondering how much you can make before tax kicks in. As of 2025, the answer lies in the trading allowance.

The trading allowance lets individuals earn up to £1,000 in gross income from self-employment or trading activities without paying Income Tax or National Insurance on it. This applies automatically if your income falls within that threshold—no need to claim it unless you want to opt out.

It’s important to note that this £1,000 is applied to your gross income, meaning the total amount you earn before taking off any expenses. So even if your net profit is low or you’ve spent a lot on running costs, the allowance is based purely on what came in.

This allowance is especially helpful for side hustles or small-scale traders. If you’re only making a little extra on the side—say, selling crafts online or offering freelance services—you might not owe anything at all, as long as you stay under the £1,000 mark.

However, if your gross trading income exceeds £1,000, you can’t just claim the allowance and ignore the rest. Instead, you must choose between using the trading allowance or claiming actual allowable expenses against your income—whichever gives you a better tax outcome.

Also worth remembering: the trading allowance doesn’t apply to everyone. If you’re part of a business partnership, you’re not eligible. And if you have multiple sources of self-employment income, they’re combined toward that £1,000 limit.

So, while £1,000 might not sound like much, it offers a valuable buffer for small traders. It simplifies tax for beginners and lets many keep their side ventures truly tax-free.