UK trading allowance to rise to £3,000 as side-hustle tax burden eases

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UK trading allowance increase

Highlights

The tax-free trading allowance will rise from £1,000 to £3,000 starting April 2027, benefiting those earning income from side hustles like reselling clothes or tutoring.
About 1.4 million people are expected to benefit, with 400,000 paying less tax—saving on average £380—and 100,000 no longer needing to report their trading income to HMRC.
Data shows side hustlers on platforms like eBay, Vinted, and Etsy rose to 2.6 million last year, with new HMRC rules requiring platforms to report users with 30 sales or €2,000 earnings annually.

Allowance increase and who benefits

As reported by The Guardian, the chancellor has confirmed that the tax-free trading allowance will increase next year, lifting the amount people can earn from a side hustle before paying tax. The change applies from April 2027 and covers income from activities such as reselling clothes, tutoring and dog-walking.

At present, people can earn up to £1,000 a year from this kind of work without paying tax. Above that level, tax may be due if their total income, including earnings from a main job, exceeds the £12,570 personal allowance.

An estimated 1.4 million people could benefit from the higher threshold. Of those, about 400,000 are expected to see their tax bills fall, with average savings of £380, while about 100,000 will no longer need to report their trading income to HM Revenue and Customs, or HMRC.

Sarah Coles, head of personal finance at AJ Bell, said the more generous allowance saves not only tax for people with smaller side hustles but also removes some of the administrative burden. She said those earning more than £3,000 will still be able to choose between using the allowance or deducting business expenses and capital costs when calculating taxable profits.

Growing side-hustle market and compliance rules

The measure comes as side hustles have expanded sharply in recent years, driven in part by pressure on household finances. Data provided by HMRC to accountancy firm Lubbock Fine shows that 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy last year, up from 450,000 in 2024.

Jane Hawkes, consumer champion and founder of the Lady Janey blog, said side hustles can help people turn hobbies, skills and spare-time activities into extra cash, and that a higher allowance should make that easier without unnecessary red tape. She also warned that people still need to understand their tax obligations, especially the difference between selling unwanted personal belongings and trading for profit.

Selling personal items such as clothes is not taxable when they are sold for less than their original purchase price, because no profit is made. Separate reporting rules that came into force last year now require platforms to inform HMRC about sellers and their earnings, and HMRC receives data on anyone who made 30 sales or generated €2,000, about £1,700, on any platform over the past year.

In our earlier coverage of Chancellor John Healey’s pre-Budget stance, we explained that he signaled continued commitment to deficit reduction ahead of the October 28 Budget, while still aiming to ease cost pressures for households and businesses. We also highlighted the latest GDP reading showing modest growth and the political debate building around how far fiscal tightening should go without undermining the government’s growth agenda.

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