Photo: Kampus Production / Pexels
Last checked 1 November 2026
Quick answer
The Trading Allowance is rising from £1,000 to £3,000 a year from 6 April 2027, starting with the 2027 to 2028 tax year. If your gross trading income is £3,000 or less and the allowance covers all of it, you generally won’t need to tell HMRC or pay tax on it. For 2025 to 2026 and 2026 to 2027 the allowance is still £1,000. The change doesn’t alter the £30,000 and £20,000 Making Tax Digital thresholds, which are based on gross income.
This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation. Why we say this.
Why this is in the news
The increase was announced in the Budget on 28 October 2026. It was back in the headlines on 31 October after Prime Minister Andy Burnham wrote about it on LinkedIn, as reported by Business Matters. He pitched it at people earning extra money on the side, naming Vinted sellers, dog walkers, pet sitters and teachers who do extra tutoring. He said around 400,000 people would save an average of £380 a year, and called it “a small measure, but one that makes it easier to earn a bit extra or give that business idea a go.”
Those numbers match HMRC’s policy paper on the change, published on Budget day. Below, we stick to what GOV.UK says.
What is changing, and when
| Now (2025 to 2026 and 2026 to 2027) | From 6 April 2027 (2027 to 2028 onwards) | |
|---|---|---|
| Trading Allowance | £1,000 | £3,000 |
| Self Assessment reporting threshold for trading income | £1,000 | £3,000 |
HMRC’s policy paper says the allowance and the Self Assessment reporting threshold for trading income both rise to £3,000 from 6 April 2027. The Budget overview (OOTLAR, measure 1.5) says that where the allowance covers all your relevant income before expenses, you won’t have to declare or pay tax on it. The change will be made through Finance Bill 2026-27, so it isn’t law yet.
HMRC estimates up to 1.4 million people could benefit. Of those, around 400,000 would pay less tax, by about £380 on average, and around 100,000 would no longer need to report their income at all.
One timing point catches people out. Your tax return for 2026 to 2027, due by 31 January 2028, still uses the £1,000 allowance. The £3,000 figure first applies to income you earn from 6 April 2027.
How the allowance works
The allowance is set against your gross trading income, meaning everything you take in before costs. If you have more than one trade, the income from all of them is added together and you get one allowance, according to HMRC’s guidance on the allowances.
- Gross income at or under the allowance: this is “full relief”. You don’t usually need to tell HMRC, but you must still keep records.
- Gross income over the allowance: this is “partial relief”. You can deduct the allowance instead of your actual expenses. You can’t do both, and you can’t use the allowance to create a loss.
Going over the allowance doesn’t mean all your income is taxed. You choose whichever deduction gives the lower profit, and your Personal Allowance and other income still affect whether any tax is due.
Illustrative examples for 2027 to 2028
These are made-up figures to show the mechanics, not a calculation for you.
| Gross income | Actual expenses | Profit using expenses | Profit using £3,000 allowance | |
|---|---|---|---|---|
| Dog walker | £2,400 | £300 | £2,100 | Nil, full relief |
| Tutor | £5,000 | £800 | £4,200 | £2,000 |
| Market stall | £5,000 | £3,500 | £1,500 | £2,000 |
The tutor would probably use the allowance. The market stall trader would probably claim actual expenses. If you claim actual costs, things like the simplified mileage rates and our allowable expenses guide become relevant. If you use the allowance, you can’t claim those as well.
When you still need to register
HMRC’s guidance lists times you should register for Self Assessment even if your trading income is under the allowance. These include wanting to:
- claim relief for a loss
- pay voluntary Class 2 National Insurance to help qualify for some benefits
- claim Tax-Free Childcare based on your self-employment income
- claim Maternity Allowance based on your self-employment
So “no need to report” is true for many people, but not everyone. If your gross trading income goes over the allowance, HMRC says you must register by 5 October after the end of that tax year. Our guide to registering as self-employed walks through it.
You can’t use the allowance against income from a partnership you’re in, from a company you or someone connected to you controls, or from your employer or your spouse’s or civil partner’s employer.
How it fits with Making Tax Digital
Making Tax Digital for Income Tax (MTD) has its own test. GOV.UK says you’ll need to use MTD from 6 April 2027 if your qualifying income for 2025 to 2026 is over £30,000, and from 6 April 2028 if it’s over £20,000 for 2026 to 2027 (GOV.UK).
Qualifying income is your total self-employment and property income before expenses, meaning turnover, according to HMRC’s qualifying income guidance. Employment pay, a partnership share, dividends and pensions don’t count.
The Trading Allowance and the MTD threshold are separate things:
- The allowance is a deduction that affects how much profit is taxed.
- The MTD test looks at gross income, before any deductions.
We haven’t found anything on GOV.UK saying the allowance lowers your qualifying income. If your turnover is close to £20,000 or £30,000, check with HMRC or an accountant. Anyone fully covered by a £3,000 allowance is far below either MTD threshold. The Budget also removed late submission penalty points for the first year of MTD quarterly updates. Our MTD penalties guide explains what that means.
Selling on Vinted, eBay or Etsy
Since 1 January 2024, online platforms have had to send HMRC details of some sellers each calendar year, according to GOV.UK’s guidance for sellers. A platform doesn’t have to report you if you make fewer than 30 sales and receive less than about £1,700 (€2,000) in the year.
Some points from that guidance:
- A platform report doesn’t automatically mean you owe tax.
- Selling your own unwanted things is unlikely to be taxable trading income. Buying or making things to sell for a profit is more likely to be trading.
- Platforms report by calendar year, but tax works on the tax year (6 April to 5 April). You’ll need to work out your income for the tax year yourself.
HMRC’s online income checker and its additional income tool can help you see whether you need to tell HMRC.
What doesn’t change
- Property allowance: this is a separate £1,000 allowance for property income. The Budget measure we read only covers the Trading Allowance.
- Universal Credit: HMRC’s guidance says the allowances don’t affect how income is counted for Universal Credit.
- HMRC’s guidance page: HMRC’s main allowances page still shows £1,000, which is correct until April 2027. We’ll update this article when HMRC updates its guidance.
Frequently asked questions
Can I earn £3,000 tax free from my side hustle now?
Not yet. The £3,000 allowance applies from 6 April 2027. For the 2026 to 2027 tax year the allowance is £1,000.
Is the £3,000 based on profit or takings?
Takings. The allowance is set against gross trading income, before expenses.
Does it apply to each side hustle separately?
No. HMRC’s guidance says income from one or more trades is added together, and you get one allowance.
Will this get me out of Making Tax Digital?
The MTD test uses gross qualifying income over £30,000 or £20,000. The allowance doesn’t change those thresholds.
I got an email from Vinted about HMRC. Do I owe tax?
Not necessarily. GOV.UK says a platform report doesn’t automatically mean tax is due. Selling personal items is unlikely to be taxed.
Sources
All checked on 1 November 2026.
- Income Tax: increasing the Trading Allowance (HMRC policy paper, 28 October 2026)
- Budget 2026: Overview of tax legislation and rates, measure 1.5 (HM Treasury and HMRC, 28 October 2026)
- Budget 2026 document (HM Treasury, 28 October 2026)
- Tax-free allowances on property and trading income (HMRC)
- Find out if and when you need to use Making Tax Digital for Income Tax (HMRC)
- Work out your qualifying income for Making Tax Digital for Income Tax (HMRC)
- Selling goods or services on a digital platform (HMRC)
- Check if you need to tell HMRC about your income from online platforms (HMRC)
- Burnham says side hustle income tax-free up to £3,000 from April (Business Matters, 31 October 2026), source of the Prime Minister’s LinkedIn comments
