Trading Allowance to increase to £3000

The government announces an increase to the Trading Allowance from April 2027.

The government announced this week that they were increasing the reporting requirement threshold for the trading income allowance from £1,000 to £3,000 for the tax year commencing 6^th April 2027.

This will benefit those running a side hustle, where there is no tax to pay and no reporting requirement. If there is tax to pay for those earning between £1,000 and £3,000, there will be a ‘new simple online service’ for reporting the net income.

The current trading allowance of £1,000 is available to those with trading or miscellaneous income. If your income is over this allowance, you must register for self-assessment to complete a tax return.  The allowance is a tax-free allowance for casual and/or miscellaneous income of up to £1,000 per tax year.  It can be used to offset against such income, such as selling craft goods made through a website.

If your gross casual earnings are £1,000 or less then the whole of the income is covered by the trading allowance.  No loss can be generated if the income is lower than the allowance.  If your income is over £1,000, but your allowable expenses that can be offset are under £1,000, then it is more beneficial to claim the trading allowance instead of the actual expenses. Conversely, if your expenses are over £1,000 then these would be claimed instead of the allowance.

Records of the business must be maintained so you can calculate the income and expenditure and work out the most beneficial treatment.

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