UK to triple tax-free side-hustle allowance to £3,000 by 2027

Britain's tax-free trading allowance will triple from £1,000 to £3,000 in April 2027, a change the government says will benefit up to 1.4 million people earning extra money from side hustles. The chancellor confirmed the rise in the budget, framing it as relief for hobbyists and resellers at a time when household budgets remain stretched.

The mechanics matter as much as the headline. Anyone earning above the allowance may owe tax if their total income, including their main job, exceeds the £12,570 personal allowance. The new £3,000 threshold does not change that structure; it simply moves the point at which reporting and liability begin.

Who actually saves money?

Of the 1.4 million beneficiaries, an estimated 400,000 will see their tax bill fall, with an average saving of £380 a year — roughly £32 a month. A further 100,000 people will stop reporting their trading income to HM Revenue and Customs (HMRC) altogether. The remaining majority, in other words, gain simplicity rather than cash, a distinction the headline figure does not make clear.

Sarah Coles, head of personal finance at AJ Bell, said that for people with a small side hustle, the more generous allowance "doesn't just save tax, it also takes the hassle of admin off their plate".

"You can spend more time working for yourself and less doing paperwork for HMRC," Coles said. "It means you can make £3,000 before you have to think about doing a self-assessment tax return."

Coles added that people earning more than £3,000 can choose between using the allowance or subtracting business expenses and capital costs when calculating taxable profits. That choice, not spelled out in the budget announcement, could make a real difference to higher-turnover sellers.

Why the change is arriving now

The number of Britons with a side hustle has grown sharply, driven by reselling clothes, tutoring and dog-walking as households seek extra income. Last year, 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy, according to data provided by HMRC to accountancy firm Lubbock Fine. In 2024, that figure was just 450,000 — a nearly sixfold increase in a single year.

That surge has collided with a tightening of surveillance. 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 on every seller who made 30 sales or €2,000 (about £1,700) on any platform in the past year.

The larger allowance arrives, in effect, into a world where the tax authority already sees platform activity in far more detail than it once did.

What stays unclear for sellers?

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 added a caveat: "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."

The distinction is straightforward in principle. Selling your own clothes or other items is not taxable if you sell them for less than you originally paid, because no profit is made. In practice, regular resellers on Vinted or eBay sit in a grey zone the new allowance only partly clarifies.

Sellers now have until April 2027 — more than two budget cycles away — before the higher threshold takes effect, leaving the current £1,000 allowance in place in the interim.