UK side-hustle tax-free allowance to rise from £1,000 to £3,000 in April 2027

The UK's tax-free allowance for side-hustle earnings will rise from £1,000 to £3,000 in April 2027, the chancellor confirmed in the budget, in a change expected to help up to 1.4 million people who make extra money from hobbies or reselling.

Side hustles have become far more common as household finances have come under pressure, with reselling clothes, tutoring and dog-walking among the popular ways to earn extra income.

HMRC data supplied to the accountancy firm Lubbock Fine shows 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy last year, up from just 450,000 in 2024.

Who gains

Of the 1.4 million people expected to benefit, an estimated 400,000 will see their tax bill fall, saving an average of £380, while about 100,000 will no longer have to report their trading income to HMRC at all.

At present, people can earn up to £1,000 a year from a side hustle without paying tax. Above that figure, tax may be owed if total income, including a main job, is more than the £12,570 personal allowance.

Sarah Coles, head of personal finance at AJ Bell, said the more generous allowance does more than cut a tax bill for people with a small side hustle — it also removes administrative hassle, freeing them to spend more time working for themselves rather than doing paperwork for HMRC. She noted that £3,000 can now be earned before a self-assessment tax return needs to be considered.

Coles added that anyone making more than £3,000 would be able to choose between using the allowance or deducting business expenses and capital costs when calculating profits for tax purposes.

Jane Hawkes, a consumer champion and founder of the Lady Janey blog, said side hustles were a good way to turn hobbies, skills and spare-time activities into extra cash, and that raising the allowance should make this easier without unnecessary red tape.

She also cautioned that people need to understand their tax obligations, particularly the difference between selling unwanted personal belongings and trading for profit, so they do not inadvertently break HMRC rules.

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.

Rules that came into force last year require platforms to tell 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.

Source: The Guardian Business.