Trading Allowance Triples to £3,000 from April 2027: What It Means for Side Hustles and New Businesses
The Autumn Budget on 28 October 2026 confirmed the tax-free trading allowance will rise from £1,000 to £3,000 from 6 April 2027, with the Self Assessment reporting threshold for trading income rising to £3,000 at the same time.
By Entrepreneur Group · Published
The trading allowance, which lets individuals earn a small amount of trading income tax-free, will rise from £1,000 to £3,000 a year from 6 April 2027. The Autumn Budget on 28 October 2026 confirmed the change, which also raises the Self Assessment reporting threshold for trading income to £3,000.
For people testing a business idea alongside a job, selling crafts or doing occasional freelance work, it means up to £3,000 of income a year can be earned without paying tax on it or reporting it, as long as the conditions are met.
What the Budget confirmed
Measure 1.5 of the Budget 2026 Overview of Tax Legislation and Rates says the government will legislate in Finance Bill 2026-27 "to increase the Trading Allowance from £1,000 to £3,000". The allowance covers trading income and certain miscellaneous income. People whose income is covered by the allowance will not need to declare it or pay tax on it, and the Self Assessment reporting threshold for trading income rises to £3,000 too. Both changes apply from 6 April 2027.
The direction of travel is not new. Alliotts reported in March 2025 that the government had announced plans to raise the reporting threshold for trading income from £1,000 to £3,000 from April 2027. The Budget confirms that the allowance itself, not just the reporting threshold, goes up. Startup Coalition describes it as "the tripling of the trading allowance", the amount you can earn from a new venture tax-free.
How the allowance works today
The Low Incomes Tax Reform Group's guide to the trading allowance explains the current £1,000 rules, which the Budget does not otherwise change:
- Full relief. If your gross trading income for the tax year is £1,000 or less, the allowance covers all of it, and income covered by it is not subject to tax or National Insurance.
- Partial relief. If your gross income is above £1,000, you can deduct the allowance instead of your actual expenses. You cannot claim both the allowance and expenses against the same income.
- One allowance in total. If you have more than one trading activity, you get one allowance and must share it across them.
- Gross means gross. Income is measured before expenses, including platform fees taken before you are paid.
LITRG also points out that claiming the allowance may not help if your expenses are higher than the allowance or you made a loss, because claiming it means giving up the deduction for real costs.
Other Budget measures for very early-stage founders
Startup Coalition also reports a new Young Entrepreneurs Allowance "to cover a year of living costs for young founders". We could not find the eligibility rules, the amount or a start date in the official Budget documents we checked, so treat it as announced but not yet detailed.
What this means for people starting out
This section is editorial guidance, not tax advice.
- Keep records anyway. You need to know your gross income to know whether you are under £3,000, and you will need figures if your side business grows.
- Compare the allowance with your real costs. If your expenses are more than the allowance, claiming actual expenses may give a better result.
- Watch the start date. The current £1,000 limit and reporting rules still apply for the 2025-26 and 2026-27 tax years. The higher limit starts with the 2027-28 tax year.
- Think about the next step. The allowance suits testing an idea. Once income grows, registering as self-employed or setting up a company may make more sense, so take advice before you scale up.
Frequently asked questions
When does the trading allowance go up to £3,000?
The trading allowance rises from £1,000 to £3,000 from 6 April 2027, the start of the 2027-28 tax year. Until then the £1,000 limit applies.
Do I need to file a tax return if I earn under £3,000 from a side hustle?
From 6 April 2027 the Self Assessment reporting threshold for trading income rises to £3,000, and income covered by the allowance will not need to be declared or taxed. Before that date the threshold is £1,000.
Can I claim the trading allowance and my expenses?
No. If your gross trading income is above the allowance, you can deduct either the allowance or your actual expenses, but not both against the same income.
Sources
- HM Treasury and HMRC: Budget 2026 Overview of Tax Legislation and Rates (measure 1.5) (reviewed 30 October 2026)
- Low Incomes Tax Reform Group: Trading allowance (updated 6 April 2026) (reviewed 30 October 2026)
- Startup Coalition: The Budget 2026 (28 October 2026) (reviewed 30 October 2026)
- Alliotts: Trading allowance to increase to £3,000 (18 March 2025) (reviewed 30 October 2026)