John Healey announced in the October 2026 budget that the trading allowance was increasing from £1000 to £3000 per annum with effect from April 2027.
The trading allowance allows you to make extra money on the side from, for example, buying and selling things on Vinted, eBay, Etsy, or other platforms, gardening, or doing part time tutoring or babysitting.
It is really tricky to figure out what is classed as trading income and it requires a deep dive into the HMRC website if you have income from something that is not specifically mentioned.
Anything that is done as PAYE is obviously not included in the trading allowance – it is something that might otherwise be classed as self-employed income.
Currently if your income from all sources of self-employment is less than £1000, then you do not have to declare that income, although there are circumstances where you may need to. With the allowance increasing to £3000 in April 2027, we are assuming that any earnings under that will not need to be declared but please check first when you submit your tax return.
One source of income that might affect a larger number of people each year could be YouTube Earnings. There are more and more people becoming influencers or YouTubers and starting to earn money on that platform as well as Instagram, TikTok and Facebook.
If you are one of those people then this trading allowance applies to you, so if you are at the beginning of your journey you may well be able to use this to reduce your tax bill.
You could also be earning money via Adsense on your websites which would be covered by this as it is classed as self-employed earnings.
The one thing you need to remember is that you need to combine all of your earnings for this, so you can’t just use this on one type of self-employed earnings.
The income that is mentioned for this extra allowance is gross income, which could be a lot different to your net profits for the year. You can use the allowance as a deduction on your self-employed income but if you do, then you can’t make any other deductions for costs incurred. You can also not declare a loss using the trading tax allowance.
You must make sure that you keep records of all your income and expenditure as HMRC can charge you if you don’t keep accurate records.
The increase in this allowance means that you could save an extra £400 in tax if you have extra earnings on the side.
It is anticipated that over 1.4 million people could potentially benefit from the increase in the trading allowance and HMRC estimates that the average benefit is £380 per person in reduced tax payments.