It may not have been one of the headline Budget announcements, but the increase in the trading allowance from £1,000 to £3,000 from April 2027 will be a useful tax break for those earning modest amounts from freelance work, occasional trading and other side hustles.
From 6 April 2027, those with qualifying gross trading income of no more than £3,000 will generally have no tax to pay on that income. The Self Assessment reporting threshold for trading income will also increase to £3,000.
For those earning more than £3,000, the allowance can instead be deducted from gross trading income when calculating taxable profits. However, where there are significant business expenses, claiming the actual allowable expenses may produce a better result.
Importantly for landlords, the increase applies only to the trading allowance. The separate property allowance will remain at £1,000, so someone with both qualifying trading and property income may potentially benefit from both allowances.
The existing £1,000 trading allowance continues to apply until 5 April 2027, so there is no change for the 2025/26 or 2026/27 tax years.
It may be a relatively small Budget measure, but for those earning a little extra alongside their main income, it represents both a useful tax break and a welcome simplification.
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