Tax-Free Allowances for UK Tradespeople 2026–27: Know What You Can Earn Before You Pay Tax

The Personal Allowance — £12,570

The Personal Allowance is the amount you can earn in a tax year before paying Income Tax. For 2026–27 it is £12,570, unchanged since 2021–22.

For self-employed tradespeople, your Income Tax is calculated on your profits — turnover minus allowable business expenses — not on what you invoice. So a builder who invoices £40,000 but spends £12,000 on materials, tools and van running costs has a profit of £28,000. After the Personal Allowance, only £15,430 is taxable.

The Personal Allowance tapers once your income exceeds £100,000: you lose £1 of allowance for every £2 of income over £100,000. At £125,140 the allowance is gone entirely, leaving you with an effective 60% marginal tax rate on income between £100,000 and £125,140.

Income Tax rates 2026–27

Scotland has different Income Tax bands and rates set by the Scottish Government.

The Trading Allowance — £1,000

If your total self-employment income is £1,000 or lessin a tax year, you don't pay any tax on it and you don't need to register for Self Assessment or file a return. This is the trading allowance.

For tradespeople doing occasional small jobs (a bit of weekend work, odd jobs for neighbours) while employed elsewhere, this means the first £1,000 is completely ignored. If your self-employment income is above £1,000, you must register and you can choose to either:

• Deduct your actual allowable expenses from turnover to calculate profit; or
• Simply deduct the £1,000 trading allowance from your income instead (useful if your actual costs are under £1,000)

For most established tradespeople, actual expenses are far higher than £1,000, so using the trading allowance instead of real expenses makes no sense. It's mainly useful for very occasional earners.

National Insurance thresholds for self-employed tradespeople

Self-employed tradespeople pay Class 4 National Insurance on their profits. The rates for 2026–27 are:

• Profits under £6,725No Class 4 NI. You may still want to pay voluntary Class 3 NI to protect your State Pension.
• Profits £6,725 – £12,570No NI due, but HMRC grants you a National Insurance credit — your State Pension entitlement is protected without paying anything.
• Profits £12,571 – £50,270Class 4 NI at 6% on profits in this band.
• Profits over £50,270Class 4 NI at 2% on profits above £50,270.

Note: Class 2 NI was abolished from 6 April 2024. Prior to that, self-employed people paid £3.45/week Class 2 NI. That's gone — Class 4 is the only NI you pay as a self-employed person in 2026–27.

Capital allowances: tax relief on tools, vans and equipment

When you buy an asset for your business — a van, scaffold tower, power tools, a laptop — you can't deduct the full cost as an expense in one go. Instead, you claim capital allowances, which let you reduce your taxable profits by the cost of the asset.

For most self-employed tradespeople, the Annual Investment Allowance (AIA) covers everything. It lets you deduct the full cost of qualifying plant and machinery in the year you buy it — up to a combined limit of £1,000,000.

What qualifies for capital allowances

• Vans and commercial vehicles (new or used)
• Power tools and hand tools
• Scaffolding, ladders, access equipment
• Computers, tablets, smartphones (business use proportion)
• Workshop equipment
• Racking and shelving for the van
• Electric vans and equipment qualify for 100% First Year Allowance as well

What doesn't qualify

• Land
• Structures and buildings (covered by Structures and Buildings Allowance instead)
• Items you bought before you started trading
• Personal cars (these use a different, less generous Writing Down Allowance)

Allowable expenses that reduce taxable profit

Before the Personal Allowance comes into play, you first deduct all allowable business expenses from your turnover to reach your profit. The lower your profit, the lower your tax. Common claimable expenses for tradespeople include:

See our full self-employed tradesperson expenses guide for a complete breakdown of what you can claim.

Marriage Allowance — worth £252/year

If you're married or in a civil partnership and one of you earns under the Personal Allowance (£12,570), they can transfer up to £1,260 of their unused Personal Allowance to the higher-earner. At the basic rate, that saves around £252 a year.

For example, if your spouse doesn't work and you earn £35,000 as a self-employed tradesperson, you could claim Marriage Allowance and effectively raise your tax-free threshold to £13,830 for that year.

You can backdate a Marriage Allowance claim up to four years. If you've been eligible and haven't claimed, that could be worth over £1,000 in backdated relief.

Working from home: the flat rate

If you do any admin, quoting or bookkeeping from home, HMRC allows a simplified flat rate for use of home as office:

• 25–50 hours per month working from home: £10/month
• 51–100 hours per month: £18/month
• Over 101 hours per month: £26/month

Alternatively, you can calculate the actual additional cost of working from home (heating, lighting, broadband) and claim that proportion — but for most tradespeople who work primarily on-site, the flat rate is simpler and sufficient.

Tax allowance FAQs for tradespeople

Related guides

• Self-employed tradesperson expenses — full list
• Sole trader Self Assessment tax return guide
• HMRC Self Assessment for tradespeople
• CIS tax guide for subcontractors
• Tradesman pension — why to start one and how