People making extra money through side hustles, including selling clothes on Vinted, dog walking and tutoring, will be able to earn significantly more before having to report their income to HMRC under a major tax change announced by Andy Burnham.
The Prime Minister has confirmed that the trading allowance will increase from £1,000 to £3,000 from April 2027, effectively tripling the amount people can earn from certain side hustles before they need to tell the taxman.
The change was quietly included in the latest Autumn Budget and is expected to benefit around 400,000 people, with the Government estimating an average saving of £380 on their tax bills.
However, the new rules will not come into force immediately. Until the current tax year ends in April 2027, the existing £1,000 limit will continue to apply.
This means people earning extra money through online selling, casual work or services will still need to check whether they have to declare their income to HMRC.
Side hustle tax allowance to triple
Announcing the change in an Instagram video, Mr Burnham highlighted the growing number of people turning to side hustles to boost their household income.
He said: "Maybe you're a keen Vinted seller, maybe you do some dog walking or pet sitting. Maybe you're a teacher doing some extra tutoring.
"Up to now, if you earn more than £1,000 a year from it, you have to start paying tax on it. But I think if you're putting in the extra hours, more of that money should stay with you."
The Prime Minister continued: "We've tripled the amount you can earn from a side hustle without paying a single penny of tax on it. From April next year, you'll be able to earn up to £3,000 tax-free and without having to report it to HMRC."
He said the change could mean "an average £380 off their tax bill" for around 400,000 people.
Mr Burnham added that the move was intended to "make it easier to earn a bit extra" or "give that business idea a go".
When does the new £3,000 side hustle tax limit start?
The higher trading allowance will not take effect until April 2027.
Until then, the existing £1,000 trading allowance remains in place for the 2026/27 tax year.
This means anyone making more than £1,000 from relevant trading or casual income during the current tax year may still need to report it to HMRC.
The new £3,000 threshold will apply from the start of the 2027/28 tax year.
People should not assume they can ignore their current tax obligations simply because the Government has announced a more generous allowance for next year.
Do I pay tax if I sell on eBay? How to start a credit score? How doing a budget can change your life! Answers to these listener questions & more in my new MARTIN'S QUESTION TIME podcast available - https://t.co/ZKZkoVBaSZ https://t.co/3vvWwbnZ6j And elsewhere
— Martin Lewis (@MartinSLewis) October 26, 2026
What are the current side hustle tax rules?
Under the existing rules, people can earn up to £1,000 in gross trading income during a tax year before they generally need to tell HMRC about it.
This is known as the trading allowance.
It can cover money made from a range of activities, including:
- Selling handmade goods or products online.
- Buying and reselling items for a profit.
- Dog walking and pet sitting.
- Tutoring.
- Freelance work and other casual services.
The £1,000 allowance applies to gross income, rather than profit, so it is important to understand how much money you have brought in before expenses.
The Government says: "Whether you get cash in hand or money paid straight to your bank account, you’ll need to tell HMRC so you can avoid any tax surprises."
People who earn more than the allowance may need to register for Self Assessment and declare their income.
Will selling old clothes on Vinted mean you pay tax?
Not everyone selling items online needs to worry about a tax bill. There is an important distinction between selling unwanted personal belongings and running a trading activity, as Martin Lewis has explained: "Tax is only due for those who are traders - that is people deliberately buying stuff in order to sell it for a profit, or building and repairing stuff to sell it for a profit."
If you are simply clearing out your wardrobe and selling clothes, furniture or other personal possessions you no longer need, you will not usually have to pay Income Tax on the money received.
However, if you regularly buy items specifically to resell them for a profit, or make and sell products as a business, HMRC may consider this trading income.
The £1,000 trading allowance is relevant to this type of income.
People who are unsure whether their online selling activity counts as trading can use the Government's online checker to establish whether they may need to pay tax.
Recommended reading:
- Drivers could save £150 a year after major Budget announcement
- Gas standing charges to be scrapped in major Budget energy bill shake-up
- Minimum wage to increase to £13.20 an hour as John Healey announces Budget pay boost
HMRC warns of penalties for failing to declare income
Although the higher allowance is on the way, HMRC's existing rules remain in force until April 2027.
People who should have declared taxable income but fail to do so could face penalties and interest on unpaid tax.
The Government warns: "If we find that you needed to pay tax on your income, but you didn’t tell us about it, you may be given a penalty.
"HMRC also charges interest on any late payment of tax, so the longer you put off paying, the more you may owe. You might also get penalties if you don’t pay your tax on time."
Share