Is bartering taxable in the UK? What HMRC expects when you swap work

Yes, bartering is taxable in the UK. If you swap services as part of your business, HMRC treats what you receive as trading income at its market value, just as if a customer had paid you in cash, and if you're VAT registered the swap can count as a sale for VAT too.¹²

Why HMRC counts a swap as income

HMRC's Business Income Manual is blunt about it, saying that "the value of trading income received in non-monetary form is taxable in full as trading income." The principle comes from an old court case, Gold Coast Selection Trust Ltd v Humphrey, and was written into law for transactions from 16 March 2016.¹ That law is section 28A of the Income Tax (Trading and Other Income) Act 2005, which carries the heading "Money's worth", and once you strip out the legal wording it says that if a deal would have counted as income had you been paid in money, then whatever you got instead counts as income at its value.²

Market value means the price you'd charge an ordinary paying customer for the same job. So if you usually charge £1,500 for a small website, then £1,500 is the figure, however friendly the swap felt.

GOV.UK's guide to working for yourself lists the signs that you're trading, and two of them are being "paid for a service you provide" and charging an agreed fixed price for your work.³ Accountants call tests like these the badges of trade, and they're how HMRC tells a business apart from the odd favour. If you're swapping the same work you normally sell, you're trading. A one-off favour for a neighbour is a greyer area, and that's one we'd leave to your accountant rather than guess at.

Is bartering legal in the UK?

Yes, swapping goods or services is a lawful way to do business, and in fact the tax rules above only exist because the law expects people to do it. Trouble starts when a swap stays out of the books and the income never gets reported.

A swap is also a contract like any other, so we'd always write down who does what, by when and what each side's work is worth. On Exchange of Services, the two members agree the details in a message thread, which gives you a written record to keep with your accounts. If the deal is big or complicated, we'd get a solicitor to draw up a proper agreement.

Do you have to pay tax on bartered goods and services?

Often you do, depending on your total trading income for the year. The trading allowance lets an individual have up to £1,000 a year of trading income tax free, and if you go over that you must register for Self Assessment, the yearly tax return, by 5 October after the tax year ends.⁴ Your swaps count towards the £1,000 at their full value, exactly as cash does. Bear in mind that the limit is based on gross income rather than profit, and if you use the allowance you can't also deduct your actual expenses from the same income.⁵

To put real tax rates on it, say a sole trader web designer in England already makes £30,000 profit a year from paying clients. She builds a site she'd normally charge £1,500 for and gets a year of bookkeeping in return, so her taxable profit goes up by £1,500.

At 2026 to 2027 rates, all of that falls in the 20% basic rate band, which runs from £12,571 to £50,270, so it adds £300 of income tax.⁶ Self-employed people also pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, which adds another £90.⁷ That means she has to find about £390 in cash for a job that brought in no cash at all, which is easy to overlook when the deal feels like a favour. Scotland has its own income tax bands, so the figures there would be different.

Can she claim the bookkeeping she received as a business cost? That depends on what it was for, so it's a question for her accountant, and either way the £1,500 still counts as income. What we'd recommend is putting money aside for the tax as soon as you agree a swap, the same as you would when a paid invoice comes in.

What is a VAT barter?

It's a swap where one or both businesses are VAT registered. HMRC's VAT guide, Notice 700, says that when you supply goods or services and get other goods or services back, "2 separate supplies take place", so both you and the other business may need to account for VAT. Each side is valued at its open market value, meaning the price before VAT that a customer would pay if they paid only in money.⁸

If our designer were VAT registered, she'd charge VAT at the standard rate of 20% on the £1,500 site, and that's £300 she'd owe HMRC.⁹ A business that isn't registered doesn't charge VAT on its side. You have to register once your taxable turnover goes over £90,000,¹⁰ and because a swap is a supply, its value counts towards that turnover. If you're close to the threshold and swap a lot, we'd keep a running total so it doesn't creep up on you.

How to record a swap in your books

Self-employed people must keep records of their business income and expenses for their tax return,¹¹ and swaps belong in those records like anything else. This is the routine we'd suggest for most small traders:

1. Agree the work and the value of each side in writing before anyone starts, using your normal prices.
2. Send an invoice for your side at full price, marked as paid by exchange of services rather than cash, and show VAT on it if you're registered.
3. Record it as a sale in your books, just as you would any other sale. If your accountant agrees it's a business cost, record what you received as a purchase.
4. Keep the agreement, the messages and the invoices with the rest of your records.
5. Set money aside for the tax, and include the value in your turnover on your Self Assessment return.

The dates matter this autumn, because for the 2025 to 2026 tax year paper returns must reach HMRC by 31 October 2026, while online returns are due by 31 January 2027, and so is the tax.¹² Further ahead, Making Tax Digital for Income Tax, HMRC's move to digital tax records, applies from 6 April 2027 to sole traders whose qualifying income was over £30,000 in the 2025 to 2026 tax year.¹³ Qualifying income is your turnover before expenses,¹⁴ so recorded swaps count towards it, which is one more reason to keep them in the books properly.

Swapping work with the tax side sorted

HMRC sees a swap as a sale paid in work instead of cash. Price it honestly, record it and put the tax aside, and swapping can still be a sensible way to get a website or a set of accounts when cash is short. You can see what businesses are asking for on the exchange board or read how exchanging works, and do ask your accountant how swaps fit your own figures.

Join Exchange of Services free and list the services you offer.

Frequently asked questions

Do you have to pay tax on bartered goods?

Generally, yes. If you get goods or services in return for work you do as part of your business, HMRC treats their market value as trading income. Swaps count towards the £1,000 trading allowance, and above that you must register for Self Assessment. Ask your accountant how this applies to you.

What is a VAT barter?

It's a swap of goods or services involving a VAT-registered business. HMRC's VAT Notice 700 treats it as two separate supplies, each valued at open market value, meaning the price before VAT a customer would pay in money. Each VAT-registered side may need to account for VAT.

Is barter trading legal?

Yes, bartering is legal in the UK. Section 28A of the Income Tax (Trading and Other Income) Act 2005 makes the value of business swaps taxable as income. The legal risk comes from leaving swaps out of your records and tax return, not from swapping itself.

How do I work out the value of a swap for tax?

Use market value, which is the price you'd charge an ordinary paying customer for the same work. For VAT, HMRC uses the price before VAT that a customer would pay in money. Write the value down when you agree the swap and invoice your side at that price.

Sources

1. HMRC: Business Income Manual BIM40051, non-monetary receipts gov.uk
2. legislation.gov.uk: Income Tax (Trading and Other Income) Act 2005, section 28A legislation.gov.uk
3. GOV.UK: Working for yourself gov.uk
4. GOV.UK: Tax-free allowances on property and trading income gov.uk
5. ByteStart: What is the £1,000 trading allowance and how does it work? bytestart.co.uk
6. GOV.UK: Income Tax rates and Personal Allowances gov.uk
7. GOV.UK: Self-employed National Insurance rates gov.uk
8. HMRC: VAT guide (VAT Notice 700) gov.uk
9. GOV.UK: VAT rates gov.uk
10. GOV.UK: VAT registration thresholds gov.uk
11. GOV.UK: Business records if you're self-employed gov.uk
12. GOV.UK: Self Assessment tax returns, deadlines gov.uk
13. HMRC: Check if you're eligible for Making Tax Digital for Income Tax gov.uk
14. HMRC: Work out your qualifying income for Making Tax Digital for Income Tax gov.uk