Big Tax Break Coming for UK Side Hustles: Trading Allowance to Triple by 2029 🚀


Are you one of the millions of Brits with a side hustle? Maybe you sell handmade crafts online, do some freelance work, or rent out a spare room. If so, we have great news! The UK government plans to raise the tax-free trading allowance for side hustles from £1,000 to £3,000 by 2029.

This change will make life easier for people with small second incomes and help more people try new business ideas without worrying about tax right away. Let's look at everything you need to know about this important change.



What Is the Trading Allowance? 💰

The trading allowance is a tax-free amount you can earn from casual trading or a side business without telling HMRC or paying tax on it. Right now, this amount is £1,000 per tax year.

This helps people who:

  • Sell items online through sites like Etsy or eBay
  • Do small freelance jobs on platforms like Fiverr or Upwork
  • Offer services like dog walking, tutoring or handyman work
  • Have other types of small business income

Having this allowance means less tax paperwork for people who only make a little extra money on the side.

The Big Change: £1,000 Growing to £3,000 📈

The current tax-free earning limit of £1,000 hasn't changed since it started in 2017. Now, the government wants to raise it to £3,000 by 2029. This is great news for the UK gig economy and anyone with a part-time business.

Here's how the increase will happen step by step:

  • 2025: £1,500
  • 2026: £2,000
  • 2028: £2,500
  • 2029: £3,000

This slow increase gives both people and HMRC time to adjust to the changes.

Why Is This Happening? 🤔

The government has several reasons for making this change:

  1. Supporting small traders and the growing gig economy
  2. Making tax simpler for people with small side incomes
  3. Helping the UK economic growth by encouraging more small businesses
  4. Bringing UK tax-free allowances closer to other countries
  5. Reducing the tax compliance cost for both individuals and the government

The Chancellor of the Exchequer says this will "empower more people to develop additional income streams without burdensome tax administration."

Who Will Benefit? 👨‍💼👩‍💼

This change will help a lot of people! Based on numbers from the Office for Budget Responsibility and the Federation of Small Businesses, we can see:

 Who Benefits

   How Many People

 Current users of trading allowance         

    About 1.2 million people

 Expected users after increase

    Over 3 million people

 People with online side hustles

    43% of all side hustlers

 Total UK adults with side hustles

    6.5 million (up 34% since 2020) 

Different types of side businesses will be helped, including:

  • Craft sellers (29%)
  • Service providers (24%)
  • Online retailers (22%)
  • Tutors and teachers (14%)
  • Other types (11%)

How This Compares to Other Countries 🌍

The UK's current £1,000 trading allowance is lower than some other countries. After the increase, the UK will have one of the better deals for small business tax relief:

  Country               Tax-Free Business Income  
  Ireland               €5,000 (about £4,200)
  UK (by 2029)                                      £3,000
  Germany               €2,400 (about £2,000)
  UK (current)                £1,000

Real-Life Examples: How People Will Save 📊

Let's look at some examples of how this bigger tax-free allowance will help real people:

Example 1: Sarah the Online Seller

  • Sarah sells handmade jewelry on Etsy
  • She earns £2,500 per year from her sales
  • Currently: She must register for Self Assessment and pay tax on £1,500 (after using the £1,000 allowance)
  • By 2029: All her earnings will be tax-free under the new £3,000 allowance

Example 2: James the Weekend Tutor

  • James teaches math on weekends, earning £4,000 per year
  • Currently: He pays tax on £3,000 (after the £1,000 allowance)
  • By 2029: He'll only pay tax on £1,000 (after the £3,000 allowance)
  • His tax saving: About £200-£400 per year depending on his tax bracket

Example 3: Deepika's Many Side Hustles

  • Deepika earns £900 from online surveys
  • She also makes £1,200 from weekend market stalls
  • Currently: She must report the market income (over £1,000)
  • By 2029: Both income streams (total £2,100) will be under the allowance

How to Calculate Your Benefit 🧮

Want to know how this might help you? Here's a simple way to work it out:

  1. Add up all your trading income from side hustles
  2. Subtract the allowance (£1,000 now, rising to £3,000)
  3. Multiply the result by your tax rate (usually 20% for basic rate taxpayers)

For example:

  • Your side hustle income: £2,500
  • Current allowance: £1,000
  • Taxable amount: £1,500
  • Tax at 20%: £300

By 2029, the same income would be fully covered by the £3,000 allowance, saving you £300 in tax.

What About the Property Income Allowance? 🏠

The Property Income Allowance is similar to the trading allowance but for income from property. It's also currently £1,000. While there's no official plan to raise this yet, some experts think it might follow the same path in future UK Budget announcements.

Important Points to Remember ⚠️

Even with these changes, there are some key things to keep in mind:

  1. Record keeping is still important, even if you're under the allowance
  2. The allowance is for income before expenses - you can choose to use either the allowance or your actual expenses, whichever gives you the better deal
  3. If you earn above the allowance, you still need to register for Self Assessment
  4. The allowance works alongside your standard Personal Allowance (£12,570 in 2024/25)
  5. These changes are still planned and could be affected by future UK fiscal policy changes

What People Are Saying 💬

Support for these changes is strong. A survey by the Federation of Small Businesses found that 78% of small business owners and side hustlers liked the idea. The formal government consultation showed 84% of respondents supported the increase.

The Association of Independent Professionals and the Self-Employed (IPSE) called it "a welcome boost for the growing number of people exploring self-employment."

Even the Institute for Fiscal Studies sees benefits, noting that the change offers "meaningful tax simplification for micro-businesses while having limited impact on overall tax revenues."

The Bigger Picture: UK's Changing Economy 🌆

This change reflects how the UK's economy is evolving. The gig economy and digital marketplace have grown hugely, with nearly 6.5 million Brits now having some form of side hustle - up 34% since 2020.

The UK Digital Marketplace has been especially important, with 43% of side hustlers mainly working through online platforms. Total side hustle activity adds about £72 billion to the economy each year, according to the Centre for Economics and Business Research.

What Happens Next? 📝

The plan still needs to go through several steps before becoming law:

  1. Inclusion in a future Finance Act
  2. Formal approval by UK Parliament
  3. Integration with the Making Tax Digital system
  4. Official guidance updates from HMRC

The good news is that there seems to be support across political parties for this change, making it likely to happen as planned.

How to Prepare for the Changes 🛠️

Even though the full increase won't happen until 2029, there are things you can do now to get ready:

  1. Start tracking your side income carefully, even if it's under £1,000
  2. Learn about the Self Assessment process if your income might go over the allowance
  3. Keep good records of your business expenses in case you need to claim them
  4. Consider how you might grow your side hustle as the allowance increases
  5. Talk to a tax professional about the best way to structure your income

Book a free consultation with our tax experts to understand how these changes might affect your specific situation.

Common Questions about the Trading Allowance Increase ❓

Do I still need to keep records if I'm under the allowance?

Yes. Even though you don't need to declare income under the allowance, good record keeping is still important. HMRC might ask to see proof that you're eligible for the allowance.

Can I use both the trading allowance and the property allowance?

Yes! If you have both types of income, you can use both allowances. For example, if you sell crafts online (trading) and rent out a parking space (property), you can use both the Trading Income Allowance and the Property Income Allowance.

Will this affect my benefits or tax credits?

Possibly. Income that falls under the trading allowance still counts as income for things like Universal Credit and tax credits. Check with the relevant agency about your specific situation.

Do I need to tell HMRC if I'm under the allowance?

Generally, no. If your trading income is below the allowance and you have no other reason to file a tax return, you don't need to tell HMRC. But keep records just in case.

Can I use the allowance if I already have a main job?

Absolutely! The trading allowance is perfect for those with secondary income from a side hustle alongside their main employment.

Why This Matters for Everyone 🌟

Even if you don't have a side hustle right now, this change is good news. It might:

  • Make it easier for you to try a business idea in the future
  • Help family members who have small side incomes
  • Boost the economy by encouraging more small-scale entrepreneurship
  • Reduce the hidden tax compliance cost burden on small traders

How We Can Help 🤝

At MA & Co Accountants, we specialize in helping small businesses and side hustlers navigate the UK tax system. Our services include:

  • Personal tax planning for those with multiple income streams
  • Self Assessment support for side hustlers
  • Business structure advice as your side hustle grows
  • Record keeping systems that make tax time easier

Get in touch with our team to discuss how we can help you make the most of these upcoming changes.

Stay Informed 📰

These changes will happen gradually over the next few years. To stay updated:

Conclusion: A Brighter Future for UK Side Hustles 🌈

The plan to raise the tax-free trading allowance from £1,000 to £3,000 is great news for millions of people with side hustles. It will make life simpler, save people money, and help more small businesses get started.

While the full change won't happen until 2029, the step-by-step increases start soon. Now is a great time to think about how you might benefit from this more generous allowance.

Whether you're already running a side business or thinking about starting one, these changes could make a big difference to your tax planning and bottom line.

Learn more about our accounting services and how we help side hustlers like you thrive in the changing tax landscape.

🔗 Read more on our blog: https://bit.ly/41crAyQ 📅 Book a Free Consultation: https://bit.ly/BookFreeConsultation15 💼 Explore Our Services: https://bit.ly/maandco

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