AJ Bell: UK Side Hustle Tax-Free Allowance Triples to £3,000

The tax-free threshold for British side hustles will triple from £1,000 to £3,000 starting in April 2027. The change, announced in the latest budget, directly impacts the growing number of Britons earning extra income through reselling, tutoring, and other informal work.

The Chancellor confirmed the expansion of the trading allowance, a move that could benefit up to 1.4 million people. Sarah Coles, head of personal finance at AJ Bell, stated that the higher limit "doesn’t just save tax, it also takes the hassle of admin off their plate." She noted that individuals can now earn up to £3,000 before needing to consider a self-assessment tax return.

HM Revenue and Customs data provided to accountancy firm Lubbock Fine shows a sharp rise in platform-based selling. In 2024, 450,000 people earned money selling goods on sites like eBay, Vinted, and Etsy. Last year, that number jumped to 2.6 million. This growth reflects a wider trend of households seeking additional income sources to manage financial pressure.

Of the 1.4 million people potentially affected, an estimated 400,000 will see their tax bills decrease. The average saving for this group is projected to be £380. Additionally, roughly 100,000 people will no longer be required to report their trading income to HMRC at all.

For those earning more than the new £3,000 threshold, Coles explained they can choose to use the allowance or deduct business expenses and capital costs when calculating profits. Jane Hawkes, founder of the Lady Janey blog, argued that the increase removes "wholly unnecessary red tape" while encouraging people to turn hobbies into cash. However, she warned that workers must still understand the difference between selling personal items and trading for profit to avoid rule violations.

Current rules state that selling unwanted personal belongings for less than the original purchase price is not taxable. New regulations introduced last year require digital platforms to report seller data to HMRC. The authority now receives information on every seller who completes 30 sales or earns €2,000, approximately £1,700, on a platform within a year.