Trading Allowance vs Expenses Calculator | NoMoreJanuary
Free calculator comparing the £1,000 trading allowance against your actual expenses. See which method saves you more tax in seconds.
If you're self-employed, you have two ways to reduce your taxable profit: claim the£1,000 trading allowance (a flat deduction, no receipts needed) or deduct youractual business expenses (requires record-keeping). The right choice depends on how much you spend — and this calculator shows you instantly which method wins.
Enter your self-employment income, your actual expenses, and your tax bracket below. The calculator compares both methods side by side, shows you the tax due under each, and tells you which one to claim.
Trading Allowance vs Expenses Calculator
Enter your figures below to see which method saves you more tax.
Claim actual expenses — you'll pay £1,000 less tax. Your taxable profit drops to £24,000 vs £29,000 with the trading allowance.
How this calculator works
The calculator compares two deductions against the same income and tax rate:
- Trading allowance: Deducts a flat £1,000 from your gross self-employment income (or your full income if it's under £1,000). No receipts required. Not available if the income comes from your employer or your spouse's employer.
- Actual expenses: Deducts your real business expenses (equipment, software, travel, phone, home office portion, etc.) from your gross income. Requires receipts and records. Available regardless of income source.
The calculator shows the taxable profit and tax due under each method, then recommends the one with the lower tax bill and shows the saving. If both methods produce the same result (expenses exactly £1,000), it tells you either works.
The break-even point: £1,000 of expenses
The decision is simpler than most articles make it sound. The trading allowance gives you a flat £1,000 deduction. Actual expenses give you a deduction equal to whatever you actually spent. So:
| Your actual expenses | Better method | Why |
|---|---|---|
| Under £1,000 | Trading allowance | £1,000 deduction is bigger than your real costs |
| Exactly £1,000 | Either (same result) | Both methods deduct the same amount |
| Over £1,000 | Actual expenses | Your real costs exceed the flat £1,000 allowance |
The tax saving from choosing the better method is the difference in tax due between the two, which depends on your tax bracket. At 20%, every £100 of extra deduction saves £20. At 40%, it saves £40. At 45%, it saves £45.
Worked examples
Low expenses: £15,000 income, £400 expenses, 20% tax rate
With the trading allowance: taxable profit = £15,000 − £1,000 = £14,000. Tax due = £14,000 × 20% = £2,800. With actual expenses: taxable profit = £15,000 − £400 = £14,600. Tax due = £14,600 × 20% = £2,920.The trading allowance saves £120/year — and you don't need to keep receipts for the £400.
High expenses: £30,000 income, £4,500 expenses, 20% tax rate
With the trading allowance: taxable profit = £30,000 − £1,000 = £29,000. Tax due = £29,000 × 20% = £5,800. With actual expenses: taxable profit = £30,000 − £4,500 = £25,500. Tax due = £25,500 × 20% = £5,100.Actual expenses save £700/year — the extra £3,500 deduction is worth £700 at 20%.
Higher-rate taxpayer: £50,000 income, £1,500 expenses, 40% tax rate
With the trading allowance: taxable profit = £50,000 − £1,000 = £49,000. Tax due = £49,000 × 40% = £19,600. With actual expenses: taxable profit = £50,000 − £1,500 = £48,500. Tax due = £48,500 × 40% = £19,400.Actual expenses save £200/year — the extra £500 deduction is worth £200 at 40%. The higher your tax rate, the more each pound of extra deduction is worth.
When you can't use the trading allowance
The trading allowance doesn't apply to all income. You must claim actual expenses if:
- Income from your employer — if you do freelance work for the company that employs you, the trading allowance doesn't apply to that income.
- Income from your spouse's employer — same rule, extended to your spouse or civil partner's employer.
- Partnership income — the trading allowance only covers sole trader income, not partnership shares.
The calculator handles this: if you tick "income from employer," it hides the trading allowance result and only shows actual expenses.
How to claim on your Self Assessment
You make the choice on your tax return each year — it's not a permanent decision. In the self-employment section of the SA100:
- Trading allowance: Enter £1,000 in the trading income allowance box (box 16.1 on the full return, box 10.1 on the short version). Don't enter any actual expenses.
- Actual expenses: Enter your expenses in the relevant expense boxes (business premises, travel, admin, etc.). Don't enter anything in the trading allowance box.
You can switch methods year to year. For the full either/or logic with box numbers, see our guide on trading allowance vs expenses.
This calculator provides estimates based on current HMRC rules. Your actual tax liability may vary depending on your individual circumstances. Always refer toHMRC's official guidance on the trading allowance.
Frequently Asked Questions
What is the £1,000 trading allowance?
The trading allowance lets you deduct a flat £1,000 from your self-employment income instead of claiming actual business expenses. If your income is below £1,000, the allowance covers it entirely and you may not need to file a Self Assessment at all. If your income is above £1,000, you can choose between the allowance or your actual expenses — whichever gives you a lower tax bill.
Can I use the trading allowance if my expenses are higher than £1,000?
Yes, but it probably won't save you money. If your actual expenses are more than £1,000, claiming actual expenses will usually give you a larger deduction and lower your taxable profit further. This calculator shows you both results side by side so you can see which is better.
Can I switch between the trading allowance and actual expenses each year?
Yes. You can choose whichever method gives you the best result each tax year. There's no requirement to stick with one method permanently. Just make sure you keep records of your actual expenses in case you want to claim them instead of the allowance.
When can't I use the trading allowance?
You cannot use the trading allowance if the income comes from your employer (or your spouse's employer) — for example, if you do occasional work for the company you work for. You also cannot use it for partnership income. In these cases, you must claim actual expenses.