Side hustles: You could soon earn £3,000 before having to declare it

If you make extra money selling online, doing freelance work, tutoring or providing dog-walking services in your spare time, this announcement could actually make life easier for you and the thousands of people who now have a side hustle.

The Chancellor has confirmed that the tax-free Trading Allowance will increase from £1,000 to £3,000 a year from 6 April 2027.

That means you can earn up to £3,000 from eligible trading or miscellaneous activities without paying Income Tax on that money or even having to report it through Self Assessment.

The Government estimates that this will affect around 100,000 people who will no longer need to report their trading income to HMRC.

What counts as side hustle income?

The Trading Allowance can cover a variety of activities, including:

• Selling products you’ve made yourself or buying goods to resell for a profit
• Freelance work, such as writing, photography or graphic design
• Providing services such as dog walking, tutoring or gardening
• Earning money from online content or other small-scale business activities.

Great news if these rules apply to you, but there are two important points to bear in mind:

1. The £3,000 allowance applies to your total eligible trading and miscellaneous income. It is not £3,000 per separate activity.

2. It refers to your gross income (the money you receive before deducting expenses), rather than your profit.

When do the new rules come into force?

The changes won’t take effect until 6 April 2027, so the existing £1,000 Trading Allowance still applies for the current 2026/27 tax year.

If your income exceeds £3,000, you’ll generally need to report it to HMRC. You can then either deduct the £3,000 Trading Allowance from your income or deduct the actual costs of running your side hustle, such as buying materials, paying for postage or advertising. You can choose whichever option gives you the bigger deduction, but you can’t claim both.

It’s also worth remembering that selling unwanted personal belongings isn’t automatically classed as trading. If you’re simply having a clear-out and selling old clothes, furniture or unwanted gifts, you generally won’t have to pay tax on the money you receive.

However, if you sell an individual valuable possession for more than £6,000, you may need to consider Capital Gains Tax. Different rules apply if you’re regularly buying or making things specifically to sell for a profit – this is more likely to count as trading and fall under the Trading Allowance.

Overall, this is good news because it means if you’re earning a little extra money on the side, you’ll soon have more flexibility to do so either without needing to worry about tax at all, or with a little more free from tax.

Please note: This article is for educational purposes only and isn’t personal financial advice. The value of investments can fall as well as rise and you may get back less than you put in. Past performance is not a reliable guide to future returns.