Andy Burnham said today that people with side hustles will be able to earn up to £3,000 a year tax free from April 2027, after the government announced in Wednesday’s Budget that it would triple the trading allowance from £1,000.
Writing on LinkedIn, the prime minister said people earning up to that amount would also no longer have to report the income to HMRC. He said that for around 400,000 people the change could mean an average of £380 off their tax bill.
Burnham named Vinted sellers, dog walkers and pet sitters, and teachers doing extra tutoring as examples of those affected.
“Up to now, if you earned more than £1,000 a year from it, you had to start paying tax on it,” he wrote. “But I think if you’re putting in the extra hours, more of that money should stay with you.”
He added: “It’s a small measure, but one that makes it easier to earn a bit extra or give that business idea a go.”
The increase was announced by Chancellor John Healey in the Budget on Wednesday. According to an HMRC policy paper published the same day, the allowance rises to £3,000 from 6 April 2027, the start of the 2027 to 2028 tax year. The Income Tax Self Assessment reporting threshold for trading income rises to the same level.
The legislation will be included in the Finance Bill 2026-27.
HMRC said the trading allowance lets individuals earn small amounts of trading and miscellaneous income tax free, and that the increase is intended to support small-scale entrepreneurship and people starting new business activity.
The paper estimates that up to 1.4 million individuals could benefit, either through a lower tax bill or simpler administration. Of those, HMRC expects 400,000 to see their tax bill fall by £380 on average, the figures Burnham cited, and 100,000 to no longer need to report their trading income.
The government said at its tax update in spring 2025 that the reporting threshold would rise to £3,000 by the end of this Parliament. HMRC said that change will now take effect from April 2027.
According to the paper, the measure will cost the Exchequer £225m in 2028 to 2029 and £180m in 2031 to 2032, figures certified by the Office for Budget Responsibility. HMRC estimates it will save individuals £15.7m a year in administration and put the cost of updating its IT systems at £725,000.
HMRC said people aged 35 to 64 make up an estimated 62 per cent of those affected, compared with 46 per cent of the UK adult population.
Under current HMRC guidance, the trading allowance covers income from self-employment, casual services such as babysitting or gardening, and hiring out personal equipment. It applies to gross income from one or more trades combined, rather than to each activity separately.
People whose income exceeds the allowance can deduct it from their turnover instead of claiming actual expenses, but cannot claim both. HMRC said the higher allowance will increase the value of that fixed deduction.
The allowance cannot be used against income from a partnership, from a company the individual or someone connected to them owns or controls, or from their employer. Those who use it must keep records of the income, according to the guidance.
The trading allowance was one of several Budget measures aimed at people starting businesses. Healey also announced a 10 per cent Founders Relief on lifetime gains of up to £10m, while halving the Business Asset Disposal Relief lifetime limit from £1m to £500,000, and a young entrepreneurs allowance covering a year of living costs for young founders.
Responding to the Budget in the Commons, former Chancellor Sir Jeremy Hunt said many businesses would be relieved that its measures amounted to a £2bn tax rise on business, but accused Healey and Burnham of putting off difficult decisions on welfare, energy and defence spending.
Burnham, who became prime minister in July, ended his post: “Your side hustle should be exactly that – yours.”
