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Trading Allowance vs Expenses: Which Should Resellers Use?

Last checked against GOV.UK: 26 October 2026 · General information, not tax advice

The short answer: if your trading income is over £1,000 in a tax year, you can take off either the £1,000 trading allowance or your real allowable expenses, not both. Stock you buy to sell counts as an allowable expense, so resellers whose stock costs more than £1,000 will usually pay tax on a smaller profit by claiming expenses. That only works if you've kept track of what you paid.

First: are you trading at all?

None of this applies to clearing out your own wardrobe. GOV.UK says you're unlikely to pay tax if you sell personal items from your home, and that you're probably trading if you sell goods you bought intending to sell for a profit, or made (GOV.UK). Its own example: someone who regularly buys from car boot sales and charity shops to resell online "may need to tell us about this income". Our Vinted tax guide explains the difference.

How the £1,000 trading allowance works

The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income (GOV.UK: tax-free allowances). It works on gross income: what you take in before any costs.

Gross trading income of £1,000 or less in a tax year (6 April to 5 April): it's covered in full, and you usually don't need to tell HMRC. GOV.UK calls this "full relief". There are exceptions, below.
Over £1,000: you must register for Self Assessment. On your return you can deduct £1,000 from your income instead of your actual expenses. GOV.UK calls this "partial relief".

The £1,000 is a single allowance across all your side hustles together, not £1,000 per platform. HMRC's example: £800 from content creation and £500 from selling crafts adds up to £1,300, so you'd need to tell HMRC (HMRC: Help for Hustles).

How claiming expenses works

If you're self-employed, you can deduct allowable expenses to work out your taxable profit. GOV.UK's list of allowable expenses includes "things you buy to sell on, for example stock or raw materials" (GOV.UK: expenses if you're self-employed). For a reseller, that's usually the biggest cost.

The catch: GOV.UK says "You cannot claim expenses if you use your £1,000 tax-free 'trading allowance'." It's one or the other.

Worked examples

These are simplified, made-up figures to show the comparison. They only look at stock costs, and they show taxable profit from the side hustle, not a tax bill.

	Reseller A	Upcycler B
Sales in the tax year (gross)	£4,000	£2,500
Stock and materials bought to sell	£1,800	£300
Taxable profit using expenses	£2,200	£2,200
Taxable profit using the £1,000 allowance	£3,000	£1,500
Lower figure	Expenses	Allowance

Reseller A buys most of what they sell, so their stock costs alone beat £1,000. Upcycler B spends little on materials, so the flat £1,000 gives the lower profit. GOV.UK puts it like this: "If your expenses are more than your income it may be beneficial to claim expenses instead of the allowances."

Why resellers often come out ahead with expenses

Reselling is a stock business. If you buy at car boot sales, charity shops or in bundles and sell on Vinted, eBay or Depop, the money you spent on stock can easily pass £1,000 in a year. But you can only claim what you can show. GOV.UK says you must keep records of all sales and income and all business expenses, with proof such as receipts (GOV.UK: what records to keep).

That's the practical problem: many resellers know roughly what they sold (the platforms show it) but not what they paid. Our free profit tracker spreadsheet logs cost and sale price per item, and the SideLedger app we're building will do it for you. Join the waitlist for first access.

Other things to know

The allowance can't create a loss. GOV.UK says that if you use the allowance you can deduct up to £1,000, "but not more than the amount of your income". If you made a loss and want to claim relief for it, you must register for Self Assessment and send a return.
Times you must register even under £1,000. GOV.UK lists making a loss you want relief for, paying voluntary Class 2 National Insurance, claiming Tax-Free Childcare based on self-employment income, and claiming Maternity Allowance based on self-employment.
Who can't use the allowance. You can't use it for income from your employer (or your spouse's or civil partner's employer), a partnership you or someone connected to you is in, or a company you or someone connected to you controls.
Benefits. GOV.UK says income for Universal Credit purposes is not affected by the allowances.
Cash basis. Cash basis is now the standard way for sole traders to record income and expenses: you record them when money comes in or goes out (GOV.UK: cash basis). GOV.UK says you might choose traditional accounting instead if your business has high levels of stock, so it's worth asking an accountant if you hold a lot of unsold stock.
Your other income matters. HMRC says you may have to pay tax on side-hustle money if your total income, including your main job, was above the £12,570 personal allowance (HMRC: tax rules for selling things).

Need to register? Our reseller Self Assessment guide covers when and how, and the deadlines.

Quick answers

Can I claim the £1,000 trading allowance and expenses?

No. GOV.UK says that if you claim the trading allowance you cannot deduct any other expenses or allowances. You use one or the other.

Which is better for resellers, the trading allowance or expenses?

It depends on your numbers. If your allowable expenses, such as the stock you bought to sell, come to more than £1,000, claiming expenses gives a lower taxable profit. If they come to less than £1,000, the allowance usually gives the lower figure. GOV.UK says that if your expenses are more than your income it may be better to claim expenses.

Do I need to keep receipts if I use the trading allowance?

Yes. GOV.UK says you must keep a record of your income if you use the allowance. Keeping receipts for stock is also what lets you claim expenses instead if they turn out to be bigger.

Not sure where you stand?

Use HMRC's free tool: Check if you need to tell HMRC about additional income.
Read GOV.UK's guide to telling HMRC about income from online platforms.
Speak to an accountant or tax adviser. If you're on a low income, the charity TaxAid gives free tax help.

Check where you are against £1,000. Our free checker shows where you stand against each platform's reporting rule and the £1,000 trading allowance. No sign-up, and nothing you type leaves your device.

Open the free HMRC limit checker Join the SideLedger waitlist

Sources

More guides for UK online sellers

Do You Pay Tax on Vinted? UK Rules & HMRC Limits 2026 – Own clothes vs reselling, the £1,000 allowance and the 30-sale reporting rule, in plain English.
Vinted HMRC Form & NI Number Request: What to Do – Why Vinted is asking for your National Insurance number, the end-of-year deadline, and why it doesn't mean you owe tax.
Vinted Tax Calculator UK: Free HMRC Limit Checker – Check your sales against the 30-sale / ~£1,700 reporting rule and the £1,000 allowance. It checks limits; it doesn't work out a tax bill.
eBay HMRC Reporting Threshold 2026: £1,707 or 30 Sales – What eBay counts towards £1,707, what it reports, and why a report isn't a tax bill.
Got an HMRC Letter About Vinted or eBay Sales? What to Do – A calm step-by-step: check it's genuine, work out if you were trading, and reply on time.
Free Vinted & eBay Profit Tracker Spreadsheet (UK) – A free download with tax-year tabs, profit per item and a check against the HMRC limits.
Do Resellers Need to Register for Self Assessment? – When reselling counts as trading, the £1,000 rule, and the 5 October and 31 January deadlines.
Depop HMRC Reporting: Do You Pay Tax on Depop Sales? – What Depop reports, what it asks you for, and Depop's own example of being reported but owing no tax.
Etsy UK Tax: HMRC Reporting Rules for Sellers 2026 – When Etsy reports you to HMRC, and why things you make to sell usually count as trading.
The £3,000 Side Hustle Threshold: Not in Force Yet – What was announced, what it would change, and why the £1,000 rule still applies today.

This is general information, not tax advice. Whether you owe tax depends on your circumstances. Check GOV.UK or speak to an accountant about your own situation. SideLedger is not affiliated with HMRC, Vinted, eBay or Depop.