UK side-hustle tax-free allowance to rise to £3,000 from April 2027

The amount people in the UK can earn from a side hustle without paying tax is set to rise from £1,000 to £3,000 a year from 6 April 2027. The Guardian reports that about 100,000 people will no longer have to report their trading income to HMRC, the UK tax authority, as a result.

The change is known as the trading allowance. It covers income from self-employed work or spare-time selling, such as goods sold online. People can currently earn up to £1,000 a year this way without paying tax on it. Tax may still be owed on earnings above that figure if total income, including from a main job, is above the £12,570 personal allowance, the basic amount of income that is tax-free.

The increase was announced in the budget by the chancellor, the UK's finance minister. The government's published guidance says the change will take effect for the tax year 2027 to 2028 and that legislation will be included in the Finance Bill 2026-27, the bill that carries the government's tax measures into law. The trading allowance is currently set out in Chapter 1, Part 6A of the Income Tax (Trading and Other Income) Act 2005.

According to the Guardian's report, an estimated 400,000 people will see their tax bill fall, with an average saving of £380. Up to 1.4 million people could benefit overall.

A separate change concerns reporting. The government will raise the threshold for trading income that must be declared through Income Tax Self Assessment, the system in which people report their income to HMRC, from £1,000 to £3,000 gross, meaning before tax is deducted. The government first announced this at its spring 2025 tax update, with the aim of making the change within this Parliament.

Online selling is a large part of the picture. Last year, 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy, according to HMRC data provided to Lubbock Fine. Under rules requiring platforms to share information with HMRC, the tax authority now receives data about every seller who made 30 sales or €2,000, about £1,700, on any platform in the past year.

The government's estimates show the group most affected is middle-aged. Individuals aged 35 to 64 are estimated to make up 62% of those affected by the change, compared with 46% of the UK adult population.

The change will reduce the government's tax income, known as the Exchequer. The government estimates the impact at minus £225 million in 2028 to 2029, minus £165 million in 2029 to 2030, minus £175 million in 2030 to 2031 and minus £180 million in 2031 to 2032. The government says the increase is not expected to have any significant macroeconomic impacts, meaning effects on the wider economy as a whole.