Should sole traders take advantage of the £1k trading allowance or utilise losses instead?
£1,000 trading allowance is available for use across your sole trader businesses (one allowance per person, not per business!)
If you have a small side hustle or startup with income (not profit) of less than £1,000pa then you don’t need to report this to HMRC
BUT
you might choose to do so.
If the business is making a loss then you can either offset this ‘sideways’ against your other personal income in the same year to reduce the overall tax paid OR carry it forward to set against future profits from the same business and therefore minimise future tax.
This sideways loss relief is particularly useful if you are starting your business as a side hustle to your main employment.