UK side-hustle tax-free allowance to rise to £3,000 next year

The tax-free “trading” allowance will increase from £1,000 to £3,000 in April 2027, the chancellor confirmed. The change is a fillip for the growing number of people who make extra cash from hobbies, reselling goods, tutoring or dog-walking at a time when household finances are under pressure.

Last year, 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy, according to data from HM Revenue and Customs (HMRC) provided to accountancy firm Lubbock Fine. In 2024 the figure was 450,000. Of the up to 1.4 million people who could benefit from the allowance increase, an estimated 400,000 will see their tax bill fall, with an average saving of £380, and about 100,000 will no longer have to report their trading income to HMRC.

Sarah Coles, head of personal finance at AJ Bell, said the more generous allowance “doesn’t just save tax, it also takes the hassle of admin off your plate”. She added: “You can spend more time working for yourself and less doing paperwork for HMRC. It means you can make £3,000 before you have to think about doing a self-assessment tax return.” Coles noted that people making more than £3,000 could choose to use the allowance or subtract business expenses and capital costs when calculating profits.

Jane Hawkes, a consumer champion and founder of the Lady Janey blog, said side hustles were a great way to turn hobbies, skills and spare-time activities into extra cash and “increasing the allowance should make this easier without wholly unnecessary red tape”. But she warned: “It’s important that people understand their tax obligations, particularly the distinction between selling unwanted personal belongings and trading for profit, so they don’t inadvertently fall foul of HMRC rules.” Selling personal items for less than their original cost is not taxable because no profit is made.

Rules that came into force last year require platforms to inform HMRC about their sellers and how much money they made. HMRC now receives data about every seller who made 30 sales or €2,000 (about £1,700) on any platform in the past year.