The UK government has announced plans to increase the tax-free trading allowance from £1,000 to £3,000, allowing individuals to receive more income from trading and miscellaneous activities without paying income tax on those earnings. The measure was confirmed in the Budget published on 28 October 2026.
The change, scheduled to take effect on 6 April 2027, will affect individuals earning money through trading activities, including those with additional sources of income. It will also raise the threshold at which trading income must be reported through Self Assessment, reducing administrative requirements for people whose earnings fall within the new limit.
Trading Allowance To Rise From £1,000 to £3,000
According to HM Revenue and Customs, the government will introduce legislation through Finance Bill 2026-27 to increase the Trading Allowance from £1,000 to £3,000. The measure covers trading and miscellaneous income and is intended to simplify the tax system for individuals whose relevant earnings are covered by the allowance.
The official Budget 2026 tax legislation document states that individuals who choose to use the relief, and whose qualifying income falls entirely within the allowance before expenses, will no longer have to declare or pay tax on that income.
The government also confirmed that the trading income reporting threshold for Self Assessment will increase to £3,000. Both changes are scheduled to begin on 6 April 2027, rather than taking effect immediately following the Budget announcement.
Under the existing arrangements, individuals can receive up to £1,000 in trading income each tax year without normally having to report those earnings to HMRC. The allowance has applied since 6 April 2017 and operates separately from the allowance available for qualifying property income.
As reported by the Express.co.uk, the announcement represents a threefold increase in the existing trading allowance. The publication highlighted its relevance to people earning additional income through activities outside their main employment.
How the Allowance Applies to Income and Expenses
HMRC’s existing guidance distinguishes between gross income and the amount remaining after business expenses have been deducted. Gross income refers to the total amount received before allowances or expenses are taken into account, regardless of whether an individual uses cash-basis or traditional accounting.
Where annual gross trading income exceeds the existing £1,000 threshold, individuals may choose to use the trading allowance instead of deducting expenses or claiming other allowances. This arrangement is known as partial relief.
According to HMRC, individuals using partial relief can deduct an amount up to the value of the allowance, provided it does not exceed their relevant income. Where business expenses are greater than income, claiming those expenses instead may be more beneficial.
The department also explains that individuals with income below the reporting threshold may still need to register for Self Assessment or complete a tax return in certain circumstances.
The announced increase will therefore change the amount of qualifying trading income covered by the allowance, while retaining the distinction between gross receipts and deductible expenses described in HMRC’s guidance.
The new £3,000 threshold will apply from the start of the 2027-28 tax year, subject to its introduction through Finance Bill 2026-27.
