Good news if you have a side hustle: you could soon earn £3,000 tax-free

If you’re a side hustler – in other words, you earn extra money doing something alongside your day job – there’s some good news hidden in the 2026 budget that you might have missed.

From April 2027, you’ll be able to earn up to £3,000 a year from your side hustle before you need to pay tax, up from the current £1,000 allowance.

So, what does this mean for you, and how much could you save?

The change could benefit up to 1.4 million people across the UK.

Here’s what it means:

• A higher tax-free allowance: you’ll be able to earn up to £3,000 a year from your side hustle before the trading allowance is exceeded.
• A lower tax bill: around 400,000 people are expected to pay less tax, with an average saving of £380.
• Less tax admin: an estimated 100,000 people will no longer need to report their trading income to HMRC, as they’ll be able to earn up to £3,000 without having to complete a self-assessment tax return solely because of that income.

Currently, you can earn up to £1,000 a year from self-employment or casual trading without paying tax, thanks to the trading allowance.

If you earn more than £1,000, you may need to pay tax on the profit above that allowance, depending on your circumstances and other income.

Your £12,570 personal allowance is the amount you can usually earn before paying income tax.

The new rules follow increased scrutiny of people earning money through online selling platforms.

Legislation introduced last year requires platforms such as Vinted to share certain seller information with HMRC.

This includes information about people who make 30 or more sales, or receive more than £1,700, through a platform over a year.

What exactly is a side hustle?

A side hustle is simply a way of making extra money outside your main job, usually through self-employment or freelance work.

It could be anything from selling second-hand clothes online to making jewellery, writing quiz questions, designing novelty tea towels or offering your skills as a freelancer.

A key difference between a side hustle and a second job is how you’re paid.

If you work an evening shift in a bar, for example, you’re employed by someone else and are usually paid through PAYE, meaning your income tax is deducted automatically.

But if you run your own little side business, you’re generally responsible for keeping track of your earnings and declaring any taxable income to HMRC.

Side hustles are more popular than ever

With the cost of living continuing to put pressure on household budgets, more of us are looking for ways to give our income a boost.

And side hustles are booming.

According to HMRC, 2.6 million people made money selling items on eBay, Vinted and Etsy in 2025. In 2024, the number was just 450,000.

And side hustles don't have to be conventional. You could make money selling pre-loved clothes, creating quirky products, offering a freelance service or turning a hobby into a little extra income.

In fact, the more creative your idea, the better. Take a look at these 20 of the quirkiest side hustles for some inspiration.

Even if your side hustle feels more like a bit of fun than a proper business, you should check the tax rules. They can apply even if your extra income is irregular or you only do something occasionally.

How can you check if you need to pay tax?

If you’re not sure whether your side hustle means you need to complete a tax return, you can use the HMRC checker on GOV.UK to find out whether you need to complete a self assessment tax return for the 2024 - 25 tax year.

If you need to register for self assessment for the first time, you’ll need to do this online so you can get your Unique Taxpayer Reference (UTR).

And remember, the new £3,000 allowance doesn't come into force until April 2027. Until then, the current £1,000 trading allowance still applies.

For more information about tax and earning extra money from a side hustle, visit GOV.UK.