Topics · trading allowance

The £1,000 trading allowance and Making Tax Digital

Last updated 28 October 2026. Every fact below is checked against the sources listed at the end. General information, not tax advice.

Short answer: The trading allowance is a tax exemption of up to £1,000 a year. If your gross trading income is more than £1,000 you can deduct the £1,000 allowance instead of your actual expenses. If your gross trading income for the tax year is more than £1,000, you need to register for Self Assessment. The allowance doesn't change the MTD test, which uses turnover before expenses or allowances.

Selling things vs trading

If you sell goods you bought intending to sell for a profit, or goods you made (including items made as a hobby), you're probably trading. Add this to any other trading income; if the total is over the £1,000 trading allowance for the tax year, you need to tell HMRC. If you're selling your own personal possessions you probably don't have to pay Income Tax on them. Selling a single item (or a set) for more than £6,000 may mean Capital Gains Tax.

Allowance or actual expenses?

Marketplace sellers often have fees, postage and stock costing far more than £1,000, in which case deducting actual expenses gives a lower profit. MTD records need the expenses either way. A digital record needs the amount, the date the income was received or the expense occurred, and its category (the same categories as Self Assessment).

Worked example: allowance vs actual expenses

Example figures Made-up figures for a fictional seller, not real data.

Line	Using allowance	Using expenses
Turnover	£8,400.00	£8,400.00
Deduction	−£1,000.00	−£3,260.00
Taxable profit	£7,400.00	£5,140.00

Here actual expenses (fees, postage and stock) beat the £1,000 allowance. Turnover for the MTD test is £8,400 either way.

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Questions

I made £900 on Etsy. Do I need to register?

Does the allowance reduce qualifying income?

No. HMRC says turnover for the threshold includes gross income from self-employment and property before any tax allowances or expenses are deducted.

What about platform reports?

Platforms must give you a copy of what they report. It shows your total for the calendar year less fees, commission or taxes deducted by the platform, split into calendar quarters. It doesn't automatically mean you owe tax and it doesn't replace your own business records.

Sources

Tax-free allowances on property and trading income (GOV.UK, checked 28 October 2026)
Check if you need to tell HMRC about your income from online platforms (GOV.UK, checked 28 October 2026)
Sole traders and landlords earning more than £30,000 urged to act now (HMRC, 5 October 2026) (GOV.UK, checked 28 October 2026)
Using Making Tax Digital for Income Tax for the first time (GOV.UK, checked 28 October 2026)
Create digital records (Making Tax Digital for Income Tax) (GOV.UK, checked 28 October 2026)
Selling goods or services on a digital platform (GOV.UK, checked 28 October 2026)

TidyTill is a record-keeping aid only. This page is general information, not tax advice. TidyTill is not HMRC-recognised software and it doesn't submit anything to HMRC: you send quarterly updates and your tax return through HMRC-recognised software. Rules and dates can change, so check GOV.UK or ask an accountant about your own situation.