At the tax update in spring 2025, the government announced that the Income Tax Self Assessment reporting threshold for trading income would be increased to £3,000 by the end of this Parliament.
Announced at Budget 2026 on 28th October 2026, the current £1,000 tax-free Trading Allowance is increasing to £3,000 to be implemented from 6th April 2027. This will provide additional tax relief for people earning income from side hustles.
The measure is intended to provide additional income tax relief for individuals with trading or miscellaneous income and to further simplify the tax treatment of small-scale business activities.
By increasing the amount of income that is covered by the allowance, the measure will reduce the number of individuals required to calculate taxable profits or submit a Self Assessment tax return to HMRC in respect of this income.
So who benefits?
According to the government, up to 1.4 million individuals could potentially benefit from the increased trading allowance either from a reduction in their tax bill or from administrative simplification.
Of the 1.4 million individuals who could potentially benefit, 400,000 individuals are estimated to have a reduction in their tax bill of £380 on average and 100,000 individuals are estimated to no longer need to report their trading income to HMRC in line with the increased reporting threshold.
PAYadvice.UK 2/11/2026