Side-hustle tax-free allowance triples to £3,000
The Budget change
Chancellor John Healey's Autumn Budget on 28 October 2026 raised the Income Tax trading allowance from £1,000 to £3,000, with effect from 6 April 2027. The Budget document describes the move as tripling the generosity of the allowance, aimed at people taking their first steps in starting a small business. The detail sits in measure 1.5 of HM Treasury's overview of tax legislation and rates.
The allowance covers trading and miscellaneous income, such as income from a side business, freelance work or occasional trading. The test uses income before expenses. Where the allowance covers all of a person's relevant income before costs, that income no longer has to be declared and no tax is due on it. The Self Assessment reporting threshold for trading income rises to £3,000 at the same time.
What stays the same until April 2027
The £1,000 limit continues to apply for the 2026/27 tax year, so income must be tracked by tax year. A person whose gross trading income is £1,000 or less in 2026/27 usually does not need to register with HMRC for Self Assessment solely because of that income, provided none of the exceptions apply. If gross income goes over the limit, registration and a tax return are normally required.
The allowance cannot be used against trading income from a company or a business partnership, and it applies only to Income Tax. Where income exceeds the allowance, the taxpayer may choose between using the allowance and claiming actual allowable business expenses, but the two methods cannot be applied to the same income at the same time.
Who benefits — and who does not
The change matters most for people earning small amounts alongside a job, such as selling goods online, doing odd jobs or offering a service. A first-year seller with £2,400 of sales, for example, would be £1,400 above the old £1,000 line but inside the new £3,000 line, so the full relief would apply from April 2027. A freelancer on £4,500 would still be above the new threshold, by £1,500, and would need to follow the normal reporting rules.
The allowance is not a general exemption for every type of income. Different rules apply to employment income and rental income, and the reporting threshold change does not remove other tax obligations. The Budget package also leaves the Personal Allowance at £12,570 for 2027/28, according to the same summaries, so the trading allowance change should be read as a targeted measure for small side incomes rather than a general tax cut.
