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A few tutoring sessions after work, gardening at weekends, handmade candles sold online. Small jobs can add up to a useful extra income. A new government announcement could make that kind of side business more worthwhile: the UK trading allowance is set to rise from £1,000 to £3,000. But there is a date attached, and it matters.
The proposed start date is 6 April 2027. The current allowance remains £1,000. That is the timetable in HMRC’s official announcement. Before treating £3,000 as money you can already earn without a tax return, it helps to understand what the allowance actually covers.
When would the £3,000 allowance start?
The UK tax year runs from 6 April to 5 April, rather than following the calendar year. The current 2026/27 tax year ends on 5 April 2027. The increase is planned for the following tax year, with legislation to be introduced in Finance Bill 2026–27. It is an announced change, not an allowance already in force.
| Tax year | Trading allowance | Position |
|---|---|---|
| 2026/27: 6 April 2026–5 April 2027 | £1,000 | Current allowance |
| 2027/28: from 6 April 2027 | £3,000 | Announced increase; legislation required |
The Budget 2026 tax documents say both the allowance itself and the Self Assessment reporting threshold for this income will rise. Self Assessment is HMRC’s tax return system. The increase is not retrospective: income belonging to 2026/27 must not be assessed against the future £3,000 limit.
It is about receipts, not the money left over
The trading allowance provides relief for individuals with qualifying trading or miscellaneous income. The threshold is measured before expenses. If customers paid you £3,500 and you spent £1,000 on materials, your receipts are £3,500. The £2,500 left after those costs is a different figure. Comparing that smaller amount with the allowance would give you the wrong answer.
Nor do you get a fresh allowance for each activity or selling account. Suppose Mark receives £1,800 for small service jobs and £1,500 for handmade products. His combined receipts are £3,300. Under the announced £3,000 allowance, choosing allowance-based relief would leave £300 of profit to take into account for tax. That does not mean a £300 tax bill. HMRC’s guidance on multiple trades explains how one allowance is shared across qualifying activities.
Any eventual Income Tax bill also depends on your other income and available Personal Allowance. That is the general amount of income you can receive without paying Income Tax, and it is separate from the trading allowance. The latter is not an extra exemption you can simply apply to part of your wages. Our guide to UK Income Tax explains the wider picture.
Two side businesses, two different calculations
Anna earns £2,400 a year looking after gardens and has no other income from activities of this kind. In 2026/27, she exceeds the current £1,000 threshold. Deducting that allowance leaves £1,400 of profit before the rest of her tax calculation. Under the announced 2027/28 allowance, her entire £2,400 would fall within the limit. If she qualifies for full relief and has no other reporting requirement, those gardening receipts alone should not require a declaration to HMRC.
Kate sells things she makes. Her receipts total £4,200, but her allowable business expenses are £3,600. Subtracting a £3,000 allowance would leave £1,200 of profit. Deducting her actual expenses would leave just £600. A larger allowance is useful, but it does not automatically make it the best option. This illustration uses the proposed amount for 2027/28.
| Kate’s method | Calculation | Profit before other allowances |
|---|---|---|
| Trading allowance | £4,200 − £3,000 | £1,200 |
| Actual allowable expenses | £4,200 − £3,600 | £600 |
You use the allowance instead of deducting expenses; you cannot add it to the same trade’s materials bills. HMRC’s calculation guidance sets out that rule. Actual expenses must meet the normal conditions for allowable business costs. All the £3,000 calculations here illustrate the announced change before it takes effect.
What if you are just clearing out a cupboard?
Selling an old coat, a child’s outgrown bicycle or furniture you no longer need is different from buying goods to resell. Disposing of your own used possessions is usually not trading and does not normally attract Income Tax. You do not automatically have to fit those sales into the trading allowance. Buying stock to make a profit, or making products to sell, is a different situation. HMRC’s online selling guidance explains the distinction. Valuable possessions can also raise separate Capital Gains Tax questions.
An online platform may still collect your details and send information to HMRC. A platform report does not itself create a tax bill or decide whether you are trading. As HMRC’s platform reporting guidance explains, the underlying activity and tax rules still matter. Receiving a message from an app is not the same as receiving a demand for tax.
Not reporting this income is not the same as having no obligations
The allowance is not available for every payment. Current exclusions cover income from your employer or your spouse’s employer, certain connected companies and partnerships. Partnership trading income is also outside the allowance. Property letting has separate rules: the £3,000 announcement concerns the trading allowance, not an increase in the property allowance. HMRC’s guide to the two allowances lists the conditions and exclusions.
You may also need a Self Assessment return for another reason, even when a small side business falls within the allowance. A higher threshold does not automatically end every reporting obligation. HMRC lists several reasons for needing a tax return that are separate from a small amount of trading income.
Keep a simple record of dates, receipts, payment confirmations and business costs. A relief that simplifies tax does not replace knowing what came in. Once a few jobs turn into a busy season, memory is a poor accounting system; an ordinary spreadsheet can help you see where you stand. HMRC’s business records guide explains the documentation requirements.
Universal Credit is a separate calculation
This distinction matters if you receive Universal Credit. Tax relief does not remove the requirement to report earnings for your benefit claim. DWP requires self-employed income and expenses to be reported for each monthly assessment period, even when earnings are zero. Universal Credit reporting and Income Tax relief are separate systems.
The increase could make a real difference if you take occasional jobs or are trying out a small business idea. Start with the date: 6 April 2027. Then check your total receipts, the nature of your activity and whether the allowance or actual expenses gives the better result. That is how an appealing £3,000 headline becomes something useful.
Sources
- HMRC — increasing the trading allowance
- Budget 2026 — overview of tax legislation, section 1.5
- HMRC — current trading and property allowance rules
- HMRC BIM86018 — multiple trades and one allowance
- HMRC BIM86016 — calculating profits using the allowance
- GOV.UK — allowable self-employment expenses
- HMRC — personal possessions and online trading
- HMRC — digital platform reporting
- GOV.UK — Income Tax and Personal Allowances
- GOV.UK — who must send a Self Assessment return
- GOV.UK — self-employed business records
- GOV.UK — self-employment and Universal Credit
