It was announced as part of the Autumn Budget measures that the Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027. The increase will help people earning small amounts from trading or other miscellaneous activities, while reducing the administrative burden of reporting this income to HMRC.
The Trading Allowance allows individuals to receive a certain amount of trading income tax-free. This can include income from selling goods or providing services. Where an individual's total relevant income is no more than £3,000, the allowance will mean they will not have to pay tax on that income or report it to HMRC, provided the relevant conditions are met.
Individuals whose income exceeds the allowance may also be able to claim it against their income instead of deducting actual business expenses. However, they cannot claim both the allowance and expenses against the same income. It is therefore worth comparing the available options where expenses are significant.
The Budget will also increase the trading income reporting threshold for self-assessment to £3,000 from 6 April 2027. This means that some taxpayers earning small amounts from trading may no longer need to complete a self-assessment tax return solely to report this income, although other reasons for filing a return may still apply.
The Government estimates that up to 1.4 million individuals could benefit from the changes, either through lower tax bills or simpler reporting requirements. Around 400,000 people are expected to see a reduction in their tax bill, averaging £380, while approximately 100,000 may no longer need to report their trading income to HMRC. The changes will be introduced through Finance Bill 2026-27 and will apply from 6 April 2027.
