The UK government plans to raise its annual tax-free trading allowance from £1,000 to £3,000 beginning April 6, 2027, a proposal that would lower some tax bills and reduce filing for some people with small incomes.
The allowance applies to eligible trading and miscellaneous income, including money earned by providing goods or services. The government says the increase is intended to encourage small-scale entrepreneurship and simplify tax administration. The measure would cover the 2027-28 tax year and also lift the Self Assessment reporting threshold for trading income to £3,000.
HMRC estimates that 400,000 people would save an average £380 on their tax bills. It expects the higher threshold to remove the reporting requirement for 100,000 people. Across both effects, as many as 1.4 million could benefit through tax reductions or simpler administration, the department estimates.
The allowance does not make every sale through an online platform taxable trading income. HMRC guidance says selling personal possessions kept for personal use is usually outside Income Tax. Buying goods to resell for profit, or selling goods made by the seller, may count as trading. For income above the allowance, a person can use the allowance instead of deducting expenses for that income, but cannot claim both.
HMRC estimates the measure would reduce Exchequer revenue by £225 million in 2028-29, £165 million in 2029-30, £175 million in 2030-31 and £180 million in 2031-32. The Office for Budget Responsibility (OBR) certified the costings. HMRC also projects annual administrative savings of £15.7 million and a one-time cost of £725,000 to update its IT systems.
The government plans to legislate through Finance Bill 2026-27, with the higher allowance scheduled to take effect April 6, 2027.
