The trading allowance UK budget change will lift the tax-free side-hustle limit from £1,000 to £3,000 in April 2027. The chancellor confirmed the increase in the budget, giving people with small amounts of trading income a clearer threshold for tax and reporting.
Up to 1.4 million people could benefit, with an estimated 400,000 seeing their tax bill go down and about 100,000 no longer having to report trading income to HMRC. Sarah Coles, head of personal finance at AJ Bell, said the higher allowance “doesn’t just save tax, it also takes the hassle of admin off their plate”.
Sarah Coles on HMRC reporting
Coles said: “You can spend more time working for yourself and less doing paperwork for HMRC. It means you can make £3,000 before you have to think about doing a self-assessment tax return.” That is the practical shift for people with a side hustle: the point at which tax starts is moving up, and the point at which reporting becomes necessary moves with it.
People currently can earn up to £1,000 a year from a side hustle without paying tax. The rise to £3,000 gives a wider cushion for small-scale sellers, tutors and other part-time earners who stay below the threshold.
HMRC rules for sellers
The change lands after rules introduced last year required platforms to inform HMRC about their sellers and how much money they made. HMRC now receives data about every seller who made 30 sales or €2,000 on any platform in the past year, with €2,000 equal to about £1,700.
That reporting system makes the new allowance more than a simple tax cut. For people earning below £3,000, it reduces both tax and paperwork; for those earning more, the decision still depends on whether to use the allowance or subtract business expenses and capital costs when working out profits for tax purposes.
Jane Hawkes on side hustles
Jane Hawkes, consumer champion and founder of the Lady Janey blog, said “increasing the allowance should make this easier without wholly unnecessary red tape”. She added: “It’s important that people understand their tax obligations, particularly the distinction between selling unwanted personal belongings and trading for profit, so they don’t inadvertently fall foul of HMRC rules.”
Selling your own clothes or other items is not taxable if you are selling them for less than you originally paid. The question for many side-hustle earners is whether the higher allowance changes how much they keep, or whether it simply keeps them inside a simpler filing path.
