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I read these pages on gov.uk:

And I understand that there are two types of income allowances:

  1. The Personal Allowance, which has different tax bands, i.e. first £12,500 is tax-free, then it's 20% and so on
  2. The first £1,000 from self-employment, like freelancing or contracting

Does this mean that if I earned £20,000 as an employee and £1,000 as a freelancer, I only pay this amount of tax:

  • (£20,000 - £12,500) * 0.2 = £1,500

I know that employers automate this process for employees through PAYE, so I only want to make sure that I, as a freelancer, don't have to pay tax on that £1,000?

  • 1
    The £1,000 self-employed trading allowance is no use to most self-employed people, because you can only claim it instead of deducting your actual expenses from your income. Most people have expenses of more than £1,000. – Mike Scott Feb 9 at 18:33

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