The £3,000 Side-Hustle Allowance: What It Means for You

In the flood of Budget 2026 explainers doing the rounds on social media this week, one measure keeps collecting saves and likes: the UK’s tax-free trading allowance is tripling — from £1,000 to £3,000 a year, starting 6 April 2027. In plain English, that’s up to £3,000 of side-hustle income a year — reselling on Vinted, tutoring, weekend dog-walking, freelance design — with no income tax on it and, for most people, no tax return to file. It’s the single most useful Budget change for ordinary earners with a side gig. Here’s how it actually works, what counts, and the traps to avoid.

What changed, exactly

At the Autumn Budget on 28 October 2026, Chancellor John Healey raised the Income Tax trading allowance from £1,000 to £3,000, effective from 6 April 2027 — the start of the 2027/28 tax year. The Budget document describes it as “tripling the generosity of the Trading Allowance”, aimed at people taking their first steps into starting a small business.

Two companion changes matter. The Self Assessment reporting threshold for trading income rises to £3,000 alongside the allowance, and HMRC estimates that roughly 100,000 people will no longer need to report trading income at all. The details sit in measure 1.5 of HM Treasury’s overview of tax legislation and rates.

What counts as a “side hustle” — and the big misconception

The allowance covers trading and miscellaneous income: self-employment income, casual services such as tutoring, babysitting or gardening, reselling goods for a profit, and hiring out personal equipment. If you’re your own boss for that income, it’s in scope.

Here’s the misconception flooding the comment threads: a second job does not count. If the income is taxed through PAYE as an employee, different rules apply — the trading allowance is for trading income, not employment income. That’s the question everyone is asking, and the answer is a clean no.

Three more rules that decide everything:

• The test uses gross income, not profit. The £3,000 line is drawn on the money coming in before any costs come out.
• It’s one allowance per person, not per hustle. Your Vinted sales, tutoring and weekend gardening all count toward the same £3,000.
• Occasional clear-outs usually don’t count. Selling your own belongings for no profit is normally not trading income — but buying stock to resell regularly for a profit is.

“The £3,000 test looks at the money coming in before any costs come out — not the profit you actually keep.”

The maths: three scenarios

The gross-income rule is the one people get wrong, so here it is with numbers:

Scenario	Gross income	What happens
Maya resells vintage clothes on Vinted in 2027/28	£2,400	Nothing to do — fully covered by the allowance, no registration, no tax
Tom tutors evenings, £3,800 gross with £900 of expenses	£3,800	Must register. Deducting the £3,000 allowance leaves £800 taxable — far better than £2,900 with actual expenses
Ana freelances design, £3,200 of sales and £900 of costs	£3,200	Must register — even though her profit is only £2,300. Gross is what counts

Tom’s choice is worth spelling out. Deducting actual expenses gives a taxable profit of £2,900 (£3,800 − £900). Deducting the flat £3,000 allowance gives £800. The allowance wins by £2,100 — which, at the 20% basic rate, saves £420 of tax. Whenever your costs are modest, the flat allowance is usually the better deal.

When you still have to tell HMRC

Above £3,000 of gross trading income in a tax year, you must register for Self Assessment by 5 October following the end of that tax year (for 2027/28, that means 5 October 2028), and file online and pay by the following 31 January. Miss the registration deadline and penalties can apply even when no tax ends up due.

Clear up three more common worries:

• Already file a return for another reason? You still report the trading income — the allowance-or-expenses choice simply applies to that income.
• Property income is separate. The £1,000 property allowance is not increased by this change; renting out a parking space or driveway is a different rule.
• There are exclusions. You can’t use the allowance against income from a partnership, from a company you own or control, or from your employer (or your spouse’s or civil partner’s employer).

And one myth to retire: online platforms now report some seller data to HMRC (generally 30 or more sales, or over €2,000 on a platform in a year). That’s information sharing — it doesn’t create a tax bill by itself. Your liability depends on your actual gross income and whether your activity counts as trading.

Five steps to take before April 2027

1. Track tax years separately. The 2026/27 tax year is still judged against the old £1,000 figure. Keep the two years’ records apart from day one.
2. Start a dead-simple log now. Date, platform, and gross amount received — a spreadsheet is fine. Six months of habit beats one weekend of archaeology.
3. Give the hustle its own home. Run side income through a separate bank account or savings pot so you always know where you stand against £3,000.
4. Get your registration sorted early. If you’ll cross £3,000 in 2027/28, you’ll need a Government Gateway account and a Unique Taxpayer Reference — don’t leave it to October 2028.
5. Don’t cap your ambition at £3,000. That’s £250 a month — a threshold is a poor reason to stay small. Build something that can outgrow the allowance.

What about readers outside the UK?

The trading allowance is a UK-only rule. In the US, there’s no equivalent blanket exemption: net self-employment earnings of just $400 a year already trigger a filing requirement, plus self-employment tax at 15.3% on top of income tax. If you side-hustle in dollars, the UK’s new £3,000 cushion is the envy of your position — but the habit underneath it (track everything, set aside tax money early) works in every currency.

Frequently asked questions

Does a second job count toward the £3,000?

No. Income taxed through PAYE as an employee is employment income, and the trading allowance doesn’t touch it. The allowance is for self-employed, trading and miscellaneous income.

My expenses are bigger than £3,000. What do I do?

Claim your actual expenses instead of the allowance. The choice is simply whichever gives the lower taxable profit — high-cost businesses should almost always take expenses.

Do I owe National Insurance on top of income tax?

Possibly. Profits above the allowance can trigger Class 2 or Class 4 National Insurance depending on the amounts, alongside income tax. If you’re over the line, check your position — or speak to an accountant — rather than assuming income tax is the whole story.

I earn well under the allowance. Do I need to do anything?

Not immediately — but start the log anyway. Side hustles have a habit of growing past thresholds while you’re busy doing the work.

The move this week: open a simple spreadsheet and log every side sale by tax year — then check whether you’re over £1,000 for 2026/27. That old threshold is the one that applies to you right now, and April 2027 is closer than it looks.