The UK’s side hustle tax allowance is going from £1,000 to £3,000, and the number that decides whether you qualify is what customers pay you, not what you keep.
The change was confirmed in the GOV.UK policy paper published with Budget 2026 on 28 October. From 6 April 2027, the trading allowance rises to £3,000, and the Self Assessment reporting threshold for trading income rises with it. HMRC estimates up to 1.4 million people could benefit, about 400,000 will see their tax bill fall by an average of £380, and about 100,000 will no longer need to report their trading income at all. The measure goes through the Finance Bill 2026 to 2027, so it is announced policy, not yet law.
The timing lands alongside new research. A report from eBay and Small Business Britain released on 30 October puts the share of UK adults running a side hustle at 46%, and says 55% of them would be more likely to invest in or grow their venture if the allowance went up. That is now happening. Whether it helps you depends on three details most of the coverage skipped.
The £3,000 test is gross income, across every hustle combined
The allowance is measured against turnover before expenses, and it covers all your trading income together. Alexander & Co’s breakdown of the Budget measure is explicit on both points: it is not tested per activity, and it is not tested on profit.
So a person who tutors two evenings a week for £1,800 a year and resells vintage clothing for £1,500 in sales is at £3,300 gross. They are over the line, even if the clothing side barely broke even after buying stock and paying postage.
Above £3,000, you choose between deducting the flat £3,000 allowance or deducting your real expenses. You cannot do both. The right choice depends entirely on your cost structure:
| 2027/28 example | Gross sales | Real expenses | Profit using real expenses | Profit using £3,000 allowance | Better route |
|---|---|---|---|---|---|
| Online tutoring | £6,000 | £400 | £5,600 | £3,000 | Allowance |
| Freelance design | £6,000 | £1,000 | £5,000 | £3,000 | Allowance |
| Reselling stock | £6,000 | £4,000 | £2,000 | £3,000 | Real expenses |
The middle row mirrors the worked example Alexander & Co published. The pattern is the useful part: service hustles with low costs (tutoring, writing, design, admin support) gain the most from a bigger flat allowance. Product hustles with real stock costs often gain little or nothing, because their actual expenses already beat £3,000.
There is one more trap for a hustle that is losing money. Claiming the flat allowance can stop you from recording a trading loss you might otherwise set against other income or future profits, as the same Alexander & Co note warns. If your first year is an investment year, run the numbers both ways.
Nothing changes for money you earn before April 2027
The new limit starts with the 2027/28 tax year. Every sale between now and 5 April 2027 still sits under the £1,000 rules, and if you clear £1,000 in gross trading income this tax year, you still register for Self Assessment and report it in the usual way.
The policy paper also lists what stays outside the allowance. The rules exclude income from your employer, from a partnership, or from a company you or a connected person control. If your side work is billed to your day-job employer, or runs through a limited company, the allowance does not apply. Property income has its own separate £1,000 allowance, which did not change.
Platforms will still report you to HMRC
This is the part that will confuse people in 2027. Since 1 January 2024, marketplaces such as eBay, Vinted and Etsy have been required to report seller income to HMRC every year. HMRC’s guidance for people selling on digital platforms sets the cutoff for goods at fewer than 30 sales or less than €2,000 (about £1,700) in a calendar year, and that threshold did not move in the Budget.
So a seller making £2,400 a year on Vinted can be under the new £3,000 allowance and still have their details passed to HMRC. That report does not mean tax is owed; the same guidance says so directly. Platforms also report on a calendar year while the allowance runs on the 6 April tax year, so the two figures will rarely match. The fix is simple record keeping: total gross sales by tax year, and a copy of the annual statement each platform is required to send you.
The bigger reporting change sits further out. Making Tax Digital for Income Tax extends quarterly digital reporting to sole traders and landlords with qualifying income over £20,000 from April 2028. A side hustle that grows past that line moves from one annual return to compatible software and quarterly updates. For anyone planning to grow, that threshold matters far more than the new £3,000 floor.
Three practical moves follow from all this. Keep a running gross total across every income stream, because that is the figure the test uses. Track real expenses even if you expect to claim the flat allowance, so you can compare routes at year end. And check your employment contract before the side work grows; our breakdown of the clauses that decide who owns your side hustle covers what to look for.
For a typical service side hustle under £3,000, this change means no tax and no return from April 2027. For anyone selling physical goods, the honest summary is less paperwork at the very bottom, very little extra tax relief, and the same HMRC visibility as before. If you are still working toward that first few thousand, our roadmap to the first $1,000 online is the better starting point than any tax rule.
This is general information on announced UK policy, not tax advice. Check the final legislation and HMRC guidance, or ask an accountant, before relying on it for your own return.