Selling online, tutoring, dog walking or doing odd jobs on the side? The 28 October Budget gives small side incomes more room before tax applies.
What is changing
The trading allowance will treble from £1,000 to £3,000 from 6 April 2027. It has been unchanged since it was introduced in April 2017. Eligible individuals will be able to receive up to £3,000 of qualifying trading and miscellaneous income each tax year without paying income tax on it, and the Self Assessment reporting threshold for trading income rises to £3,000 as well.
What it is worth
Take someone who already uses their personal allowance in a job and makes £3,000 a year on the side. They currently pay 20% basic rate tax on £2,000 (£3,000 less the £1,000 allowance), which is £400. From April 2027 that falls to nil.
The small print
- Not yet. The higher allowance does not take effect immediately. The 2026/27 tax year is still on £1,000.
- One allowance. Income from all qualifying activities is added together. The allowance is not a separate £3,000 for each activity.
- Allowance or expenses. Using the allowance means you cannot also deduct actual expenses against the same income, and it cannot create a loss. If your costs are more than £3,000, claiming them is usually better.
- Above £3,000. You can still deduct the £3,000 instead of your expenses. With £6,000 of income and £1,000 of actual costs, deducting the allowance instead leaves taxable profits of £3,000.
- Rental income. The separate £1,000 property income allowance is not increasing.
- Exclusions. The allowance is for individuals, not companies. Partnership trading income and certain income from employers or connected businesses are also excluded.
Still need a return?
If your trading and miscellaneous income is above £3,000, you will still need to file a tax return, even if your personal allowance means no tax is due. Don't stop filing a return just because your trading income is below the new threshold. Your return may be needed for other reasons.
Online platforms now report sellers' income to HMRC, so it is worth getting this right.
When a side hustle grows
From 6 April 2027, Making Tax Digital for Income Tax applies above £30,000. If your side income is heading that way, it is time to treat it as a business.
We help people in Cheltenham with self assessment and with turning a side hustle into a business. See our personal tax page or book a free call.
This article is general information, not advice for your situation.
