The trading allowance 2027 rules lift the tax-free limit for side hustle income from £1,000 to £3,000, starting on 6 April 2027. Until then, the limit stays at £1,000. If you currently sell through online marketplaces, our guide on how to use the £1,000 trading allowance when selling on Vinted, eBay and other platforms explains how the existing rules apply before the new limit begins. The budget on 28 October 2026 tripled the allowance, so the first £3,000 of gross trading income will fall outside income tax and Class 4 National Insurance from the start of the 2027/28 tax year. The change was the most-covered side-hustle story in the 28 Oct budget coverage, largely because it directly affects people earning smaller amounts outside their main job.
The trading allowance will triple on 6 April 2027, the first day of the 2027/28 tax year. Budget 2026, delivered by Chancellor John Healey on 28 October 2026, set the new figure at £3,000. It applies to both trading and miscellaneous income.
Nothing changes before that date. For 2026/27, the allowance remains £1,000. The £3,000 allowance will first apply to income arising during the 2027/28 tax year.
The change provides genuine income tax relief rather than simply raising the reporting threshold. For example, an eligible side hustle earning £2,800 in gross trading income during 2027/28 could fall fully within the allowance. This would leave no taxable trading profit for income tax or Class 4 National Insurance purposes, provided the trading allowance rules apply.
Anyone with small-scale trading income outside their main job benefits, including people who never think of themselves as self-employed. The allowance is per person, not per business, and you claim it once across everything you earn from trading in a tax year.
You are likely to benefit if you sell goods online, provide services such as tutoring, gardening, cleaning or dog walking, do gig work through an app, or earn small amounts from creative work and content. The allowance also covers miscellaneous income, so incidental earnings of the same kind can fall within it.
You get no benefit if your trading income already exceeds the new limit, or if you run a business that is your main occupation. In those cases the normal self-assessment rules apply as before, and the allowance works as a deduction rather than an exemption.
One condition catches people out: the allowance applies to gross income, meaning the money that comes in before you deduct anything. A seller turning over £2,900 with £2,400 of stock costs has £2,900 of gross trading income, not £500 of profit, and it is the £2,900 that is measured against the allowance.
It can cover platform sales, but only where you are trading rather than clearing out your own belongings. Selling personal items you no longer want, at a loss or roughly what you paid, is not trading, and the allowance is not needed for it.
You are trading when you buy to resell, make items to sell, sell in volume with the intention of profit, or run the activity in a business-like way. HMRC looks at the pattern of activity rather than the platform, so a wardrobe clear-out and a curated resale operation are treated differently even on the same site.
Platforms report seller data to HMRC once you pass their reporting thresholds, currently around £1,700 of sales or 30 transactions in a calendar year. Being reported does not create a tax bill. It simply means HMRC holds the figures, which is why the trading allowance and accurate records matter more than they did before platform reporting began.
Three worked examples show where the lines fall under the new rules.
Example one, inside the allowance. Priya sells handmade jewellery on Etsy and takes £2,700 in the 2027/28 tax year. Her gross trading income is £2,700, which is below the £3,000 allowance, so she owes no income tax and no Class 4 National Insurance on it and does not need to report the income through self-assessment.
Example two, just above the allowance. Tom resells vintage clothing and takes £4,200 gross, with £1,100 of stock and postage costs. He can either deduct the £3,000 allowance, leaving £1,200 taxable and ignoring his expenses, or deduct his actual £1,100 of expenses, leaving £3,100 taxable. The allowance gives the lower taxable figure here, so he uses the allowance and pays tax on £1,200.
Example three, expenses beat the allowance. Aisha tutors and earns £5,000 gross with £2,600 of travel, materials and software. Deducting the £3,000 allowance leaves £2,000 taxable, but her actual expenses of £2,600 leave £2,400 taxable, so the allowance wins again. Swap the figures so expenses reach £3,400 and the expenses route becomes the better one. The rule is simple: compare both, then take the larger deduction, never both.
You report the income and pay tax on the amount above whichever deduction you choose. Registering for Self Assessment remains the route, and the deadline for the 2027/28 tax year will be 31 January 2029 for an online return.
Class 4 National Insurance starts to apply on profits above the Small Profits Threshold, which is £7,105 for 2026/27. Class 2 National Insurance became voluntary from April 2024 at £3.65 a week, so check whether paying it builds the State Pension record you need before treating it as an automatic cost.
If you have a job as well, your side hustle income still uses your personal allowance and your tax bands. The allowance is claimed against the trading income first, and the remaining profit then stacks on top of your salary, which can push part of it into the higher rate sooner than expected.
Our tax planning services can help you review how the allowance interacts with employment income, expenses and future business growth.
Nothing needs doing this week, and that is the useful part. The current £1,000 allowance governs the 2026/27 year, so any 2026/27 return filed by 31 January 2027 uses the old figure.
Some self-employed individuals will also need to consider digital record keeping and quarterly reporting requirements. Our Making Tax Digital accountants can help businesses prepare where the rules apply.
In total. It is one allowance per person per tax year, covering all your trading income combined, so two side hustles earning £2,000 each give £4,000 of gross trading income, which exceeds the allowance.
No, provided your gross trading income stays within the allowance and you have no other reason to file, such as income from property or savings above the reporting limits. Keep records anyway, since platform data reaches HMRC.
No. You take one or the other. Compare £3,000 against your actual allowable expenses and choose whichever gives the lower taxable profit.
Not this one. Property income has its own separate £1,000 property allowance, and the two allowances work independently.
Usually not. Selling personal possessions at a loss or around what you paid is not trading, so neither the allowance nor a tax bill applies.
From 6 April 2027, eligible gross trading income of up to £3,000 can fall within the trading allowance. The current £1,000 limit remains in place for 2026/27.
This change rewards planning, and the planning window opens before April 2027. If your side hustle is growing towards the new limit, we can look at how the allowance interacts with your salary, your tax band and your record keeping, so the first year under the £3,000 threshold runs without a surprise bill.
Our team handles self-assessment for sole traders and side hustlers, sets up bookkeeping that separates gross income from expenses, and reviews whether a limited company becomes worthwhile as trading income grows. Our wider accounting services can also support businesses needing ongoing financial reporting and compliance assistance. We also deal with HMRC enquiries where platform reporting has raised a question about undeclared income.
Book a free consultation with Apex Accountants to review your side hustle income before the April 2027 change takes effect.
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