The self-employed tax-free allowance: how much can you earn before paying tax?
The Personal Allowance: £12,570
For 2025-26 and 2026-27 everyone gets a £12,570 Personal Allowance. It is one allowance across all your income, not one per income source. That matters if you have a job as well. A full-time salary usually uses the whole allowance through PAYE, so every pound of your self-employed profit is then taxed from the first pound, normally at 20%.
The allowance shrinks by £1 for every £2 of income over £100,000 and is gone by £125,140. Our guide to the £100k taper explains the 60% rate that creates.
Class 4 National Insurance also starts at £12,570
Class 4 is charged on self-employed profit above £12,570. Unlike the Personal Allowance, this threshold applies to your self-employed profit only, whatever you earn elsewhere. Someone with a full-time job and a £5,000 side business pays Income Tax on the £5,000, but no Class 4. The rates are in our Class 4 guide.
The £1,000 trading allowance
The trading allowance is a separate tax exemption of up to £1,000 a year on income from self-employment, casual work such as babysitting or gardening, or hiring out personal equipment. It works in two ways.
Gross income of £1,000 or less. GOV.UK says that in most cases you do not need to tell HMRC or declare it. "Gross" means before any costs. There are exceptions, for example if you want to claim a loss or pay voluntary Class 2.
Gross income over £1,000. You must register for Self Assessment by 5 October after the tax year ends. You can then deduct a flat £1,000 instead of your actual expenses. You cannot claim both.
You cannot use the trading allowance on income from a partnership, or on trading income from a company you or someone connected to you controls, or from your employer.
Allowance or expenses? A quick example
Say you earn £3,000 from a side business and spend £400 on it. With the trading allowance, your taxable profit is £3,000 minus £1,000, which is £2,000. With actual expenses it is £3,000 minus £400, which is £2,600. The allowance wins by £600, which saves £120 at the basic rate. Flip it round: if your costs were £1,800, claiming the expenses would be better. Pick whichever is bigger each year. The common allowable expenses are listed in our guide.
Other allowances worth knowing
- Personal Savings Allowance: £1,000 of bank interest tax-free for basic-rate taxpayers, £500 for higher-rate. See tax on savings interest.
- Dividend Allowance: £500 of dividends tax-free. See dividend tax by year.
- Property allowance: a separate £1,000 for rental and property income, which works like the trading allowance. See property income and Self Assessment.
- Marriage Allowance: if your spouse or civil partner earns less than the Personal Allowance and you are a basic-rate taxpayer, they can transfer £1,260 of their allowance to you.
- Capital allowances: tools, vans, computers and other equipment are usually claimed this way rather than as day-to-day expenses.
See your own tax-free amount
Put your profit and any other income into the estimator. It applies the Personal Allowance and the Class 4 threshold in the right order and shows the result line by line. For the totals at different profit levels, see how much tax you pay when self-employed. More ways to bring the bill down are in how to reduce your Self Assessment tax bill.
Frequently asked questions
How much can I earn self-employed before paying tax?
If self-employment is your only income, £12,570 of profit in 2025-26 and 2026-27 before any Income Tax or Class 4 National Insurance. If you also have a job that uses your Personal Allowance, Income Tax starts on the first pound of self-employed profit, but Class 4 still starts at £12,570.
What is the £1,000 trading allowance?
A tax exemption of up to £1,000 a year on trading income. If your gross trading income is £1,000 or less, you usually do not need to declare it. Above that, you can deduct £1,000 instead of your actual expenses.
Do I need to register as self-employed if I earn under £1,000?
Usually not, if your gross trading income is £1,000 or less in the tax year. You may still choose to register, for example to claim a loss or pay voluntary Class 2 National Insurance.
Can I claim the trading allowance and expenses?
No. You choose one or the other for that income. Use whichever gives the bigger deduction.
Do I pay National Insurance on profit under £12,570?
No Class 4. Class 2 is not charged either. If your profit is below the small profits threshold you can pay voluntary Class 2 to protect your State Pension record.