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?

  • 2
    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
    Commented Feb 9, 2020 at 18:33

1 Answer 1


Yes. The allowances are separate.

Your employment income would be taxed via PAYE, and then you’d complete a self assessment tax return and declare your use of the allowance up to £1000 (the amount of allowance used cannot exceed your income from self employment). If your expenses are higher than £1,000, you will not claim this allowance and would instead declare your final expenses.

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