UK side-hustle tax-free allowance to rise to £3,000 next year
Up to 1.4 million people could benefit from change to trading allowance announced in budget, with some saving hundreds in tax
The amount Britons can earn from a side hustle has exploded in recent years, with reselling clothes, tutoring and dog-walking among the popular avenues to create extra income at a time when household finances are under pressure.
Last year, 2.6 million people made money selling goods through platforms including eBay, Vinted and Etsy, according to data provided by HM Revenue and Customs (HMRC) to accountancy firm Lubbock Fine. In 2024 the number was just 450,000.
Currently, people can earn up to £1,000 a year from a side hustle without paying tax but above this you may owe tax if your total income, including your main job, is above the £12,570 personal allowance.
Out of the 1.4 million people, an estimated 400,000 will see their tax bill go down, with an average saving of £380. Meanwhile, about 100,000 people will no longer have to report their trading income to HMRC.
Sarah Coles, the head of personal finance at AJ Bell, said that for people with a small side hustle, the more generous allowance “doesn’t just save tax, it also takes the hassle of admin off their plate”.
As a result, she added: “You can spend more time working for yourself and less doing paperwork for HMRC. It means you can make £3,000 before you have to think about doing a self-assessment tax return.”
Coles said people who were making more than £3,000 would have the choice to use the allowance or subtract business expenses and capital costs when calculating their profits for tax purposes.
Jane Hawkes, a consumer champion and the founder of the Lady Janey blog, said side hustles were a great way to turn hobbies, skills and spare-time activities into extra cash and “increasing the allowance should make this easier without wholly unnecessary red tape”.
But, she added: “It’s important that people understand their tax obligations, particularly the distinction between selling unwanted personal belongings and trading for profit, so they don’t inadvertently fall foul of HMRC rules.”
Selling your own clothes or other items is not taxable if you’re selling them for less than you originally paid as you are not making a profit.
Rules came into force last year requiring platforms to inform HMRCabout their sellers and how much money they made. HMRC now receives data about every seller who made 30 sales or €2,000 (about £1,700) on any platform in the past year.
