UK Side-Hustle Tax-Free Allowance to Rise to £3,000 in 2027
The UK will raise its tax-free trading allowance for side hustles from £1,000 to £3,000 in April 2027. Up to 1.4 million people could benefit, while an…
The side-hustle tax-free allowance rise will let people in the UK earn up to £3,000 from trading without paying tax from April 2027, up from £1,000. The budget change could benefit up to 1.4 million people, including those who resell goods or earn extra money through hobbies.
For people with modest side incomes, the increase could mean a lower tax bill or less paperwork for HM Revenue and Customs (HMRC). An estimated 400,000 people are expected to pay less tax, with an average saving of £380, while about 100,000 will no longer need to report their trading income to HMRC.
Who could benefit from the higher allowance?
The trading allowance covers income from side activities such as reselling clothes, tutoring and dog-walking. The change was announced in the budget, with the higher threshold taking effect in April 2027.
At present, people can earn up to £1,000 a year from a side hustle without paying tax. Above that amount, tax may be due if their total income, including earnings from a main job, exceeds the £12,570 personal allowance.
The scale of online selling has grown sharply. Last year, 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy, based on data HMRC provided to accountancy firm Lubbock Fine. In 2024, the figure was 450,000.
That distinction matters for people who sell items they already own. Selling personal clothes or other belongings for less than the original purchase price is not taxable because the seller has not made a profit. The allowance concerns trading income, rather than every sale of a used item.
Tax relief and reporting obligations
Sarah Coles, head of personal finance at AJ Bell, said the larger allowance could reduce both tax and administration for people with small side businesses. “You can spend more time working for yourself and less doing paperwork for HMRC,” she said. “It means you can make £3,000 before you have to think about doing a self-assessment tax return.”
People whose trading income is above £3,000 will be able to use the allowance or deduct business expenses and capital costs when working out taxable profits, Coles said.
Jane Hawkes, a consumer champion and founder of the Lady Janey blog, said the increase could make it easier to earn from hobbies and spare-time skills. She also urged sellers to understand the difference between clearing out unwanted belongings and trading for profit, warning that confusion could lead people to fall foul of HMRC rules.
Online platforms already have reporting duties. Rules introduced last year require them to share information about sellers and their earnings with HMRC. The tax authority receives data about sellers who made 30 sales or €2,000 (about £1,700) on a platform in the past year.
The higher allowance changes the threshold for side-hustle income, but it does not remove the distinction between occasional sales of personal possessions and trading for profit. The new £3,000 allowance starts in April 2027.
