The UK government plans to increase the tax-free trading allowance from £1,000 to £3,000 from 6 April 2027, allowing more people to earn money from small businesses and side jobs without paying Income Tax on that income.
The change was announced in the Budget on 28 October 2026. It would benefit people who earn from activities such as dog walking, tutoring, making goods for sale and freelance work. It also raises the threshold at which eligible trading income normally needs to be reported to HM Revenue & Customs (HMRC).
However, the government has announced the change, not yet brought it into force. The increase is due to be legislated for in Finance Bill 2026–27. The current £1,000 threshold remains in place for the 2026–27 tax year.
What is changing?
The trading allowance is a tax relief for individuals receiving qualifying trading or miscellaneous income. Currently, people whose combined gross income from qualifying activities is no more than £1,000 a tax year can generally have that income covered by the allowance.
Under the proposed rules, that figure rises to £3,000 for the tax year beginning 6 April 2027. The Income Tax Self Assessment reporting threshold for trading income will also rise to £3,000, according to HMRC’s policy paper.
Who could benefit?
The measure is aimed at people with relatively small amounts of income from self-employment or casual work, including:
- Dog walkers, pet sitters and gardeners
- Private tutors and people offering occasional services
- People making or buying goods to sell at a profit
- Freelancers and creators receiving modest fees for their work
These are examples of potentially qualifying activities, not a guarantee that every payment qualifies. Existing restrictions still matter, including rules concerning income from an employer, certain partnerships and connected companies.
Does this mean Vinted sellers can make £3,000 tax-free?
Not necessarily, because selling personal possessions is usually not trading in the first place. Someone clearing out their wardrobe or selling old household items will generally not owe Income Tax on those sales, even if the total exceeds £1,000. A valuable single item may raise separate Capital Gains Tax questions.
A person regularly buying clothes or other products specifically to resell for a profit is more likely to be trading. That income can count towards the allowance. HMRC explains the distinction in its online-platform income guidance.
Is £3,000 turnover or profit?
The threshold is based on gross trading income, before expenses. It is not a separate £3,000 allowance for every activity.
- If someone receives £2,400 from tutoring and £400 from dog walking in the same tax year, the combined £2,800 is within the proposed allowance, assuming the income qualifies.
- If someone receives £2,500 from selling goods and £1,000 from gardening, their combined gross trading income is £3,500, above the proposed reporting threshold.
- If that person receives £3,500, being above £3,000 does not mean the whole amount becomes taxable. They may be able to deduct the trading allowance, or instead claim allowable business expenses, depending on their circumstances.
A trader cannot deduct the trading allowance and the same business’s actual expenses together. Keeping records of receipts and costs remains important, even where no tax is due. The separate £1,000 property allowance is not being tripled by this measure.
How much tax will people actually save?
HMRC estimates that up to 1.4 million people could potentially benefit from lower tax bills or simpler administration. Within that group, about 400,000 people are expected to save an average of £380 on their tax bills. A further 100,000 people are estimated to no longer need to report their trading income to HMRC because of the higher reporting threshold.
Those figures are government estimates, not a promise that everyone earning under £3,000 will save £380. Actual savings depend on individual income and tax circumstances. Someone who already pays no Income Tax may not receive a cash tax saving.
Will the new allowance remove the need for a tax return?
For eligible people whose qualifying gross trading income is no more than £3,000, the new reporting threshold is intended to remove the need to declare that income for Income Tax Self Assessment. But a person may still need a tax return for another reason or may choose to file one, for example to claim certain reliefs or make National Insurance arrangements.
The allowance does not remove all possible tax obligations or the need to keep adequate income records. It also does not replace separate reporting rules for online platforms, which can share seller information with HMRC without automatically making the seller liable for tax.
When will it take effect?
If the legislation proceeds as announced, the higher allowance will apply from 6 April 2027, for the 2027–28 tax year onwards. Until then, the existing £1,000 trading allowance is the figure to use when checking the rules for 2026–27.
For anyone unsure whether their activity counts as trading, HMRC provides an online checker.
Sources
- HMRC: Increasing the trading allowance, published 28 October 2026
- HM Treasury/HMRC: Budget 2026 overview of tax legislation and rates
- HMRC: Tax-free allowances on property and trading income
- HMRC: Income from online platforms
This article explains the announced rules as of 2 November 2026 and is general information, not personal tax advice.
