Guides

The £1,000 trading allowance, and the £3,000 change coming

Updated 29 July 2026. Figures checked against the GOV.UK pages linked below.

The trading allowance is the number that decides whether small scale selling, dog walking, crafting or any other side income needs anything doing about it at all. It is also at the centre of a rule change the government has announced that almost every article gets wrong. Both halves are explained here.

What the trading allowance is

Every individual gets a £1,000 trading allowance per tax year, 6 April to 5 April. If your gross trading income for the year is £1,000 or less, it is covered by the allowance: there would normally be no tax to pay on it and no need to register for Self Assessment for it. This applies to trading income, meaning money from buying or making things to sell, or from providing services. It is not needed for selling your own possessions, which is generally not trading and not taxable in the first place. The allowance is set out on GOV.UK.

Gross means before anything is taken off

The £1,000 test uses your gross trading income: the total you were paid before platform fees, postage, or the cost of the items. A common mistake is to compare profit with the allowance. If you sold £1,400 of flipped items that cost you £600, your gross is £1,400 and you would normally be over the allowance, even though your profit is £800.

Over £1,000: what would normally happen

If gross trading income passes £1,000 in a tax year, you would normally need to register for Self Assessment and file a return. The registration deadline is 5 October after the end of the tax year the income belongs to, per GOV.UK. Going over the allowance does not necessarily mean much tax is due; it is a filing trigger, and on the return the allowance can still work in your favour, as follows.

Allowance or expenses, never both

On a return you choose one of two deductions: the £1,000 allowance, or your actual business expenses. Whichever is bigger usually wins. A seller with £2,500 of trading income and £300 of costs would normally do better claiming the £1,000 allowance. A seller with £2,500 of income and £1,800 of stock costs would normally claim actual expenses instead. One caution: if your expenses are bigger than your income, claiming the allowance would mean giving up the loss, so people in a loss position would normally claim actual expenses.

The change nobody explains: £1,000 to £3,000

In March 2025 the government announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 gross, at some point before the end of this parliament. The announcement is on GOV.UK, and it is widely misreported, so here is what it actually does and does not do.

• It is not in force yet. As of mid 2026 no start date has been set. Until it lands, the £1,000 rules above are the rules.
• The tax free amount does not change. The trading allowance stays £1,000. Income between £1,000 and £3,000 can still carry tax; what changes is how you report it.
• The change is about paperwork. People with gross trading income between £1,000 and £3,000 would no longer need a full Self Assessment return. Those who owe tax in that band are expected to use a new, simpler online service to declare and pay it.
• Around 300,000 people are expected to come out of Self Assessment as a result, and the government estimates about 90,000 of them will have no tax to pay and nothing to report at all.

So "you can now earn £3,000 tax free from a side hustle" is wrong twice over: the change is not live, and it was never about tax free income.

What this means in practice

For now, the working rules are simple. Selling your own possessions: generally not trading, allowance not needed. Trading with gross income of £1,000 or less in a tax year: normally covered, nothing to do. Trading above £1,000: registering for Self Assessment would normally be needed, and the platform reporting thresholds in the 30 items rule run entirely separately from all of this. If a platform reported you, that changes none of the arithmetic above; being reported is not the same as owing.