The £3,000 Side Hustle Tax Break
If you have ever fancied earning a bit of extra money from a side hustle but worried about the tax implications, there is some good news from yesterday’s Budget.
The Chancellor has announced that the tax-free trading allowance is to be tripled, rising from its current £1,000 a year to £3,000 a year from 6 April 2027.
It isn’t the biggest announcement in the Budget, and it may not have received as much attention as some of the headline-grabbing measures. But I think it could be particularly good news for older people (at whom PAS is aimed) who want to supplement their pension or other income without taking on a conventional part-time job.
Whether you fancy answering online surveys, selling your skills as a freelance writer, tutoring, testing websites or trying another small business venture, the higher allowance could give you considerably more freedom to earn a little extra money without worrying about Income Tax or Self Assessment paperwork.
Let’s look at what is changing and how you might take advantage of it.
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What is the trading allowance?
The trading allowance is a tax exemption that allows you to earn a certain amount from trading and miscellaneous income without paying Income Tax on it.
At present, the allowance is £1,000 per tax year. If your total qualifying income from side hustles and similar activities is no more than £1,000, you generally do not have to declare it to HMRC or pay tax on it.
From 6 April 2027, the allowance will increase to £3,000.
That means you could potentially earn up to £3,000 a year from qualifying activities without paying Income Tax on that income and, provided the relevant conditions are met, without needing to report it to HMRC through Self Assessment.
The change will apply from the 2027/28 tax year. Until then, the existing £1,000 allowance remains in place.
The Government has also confirmed that the Self Assessment reporting threshold for this type of income will rise to £3,000, helping to reduce the administrative burden for people with relatively small amounts of additional income.
Why this could be particularly good news for older people
Many people approaching retirement, or already retired, would welcome a little extra money each month.
It might help pay for holidays, meals out, hobbies, Christmas presents or simply the rising cost of everyday living. For others, earning a little extra is about staying active, making use of their skills or enjoying the satisfaction of doing something productive.
The difficulty is that a conventional part-time job can involve fixed hours, commuting and commitments that interfere with retirement plans.
A side hustle can be much more flexible. You can choose something that fits around your existing lifestyle, and in many cases work from home whenever it suits you.
The new £3,000 allowance could make these activities more attractive, particularly if you are happy earning a modest amount rather than trying to build a full-time business.
For example, someone who earns £200 a month from a qualifying side hustle would make £2,400 a year. Assuming the income qualifies for the trading allowance and the person chooses to use it, the entire amount could fall within the £3,000 allowance from April 2027.
That’s £2,400 of additional income without an Income Tax bill on those earnings.
Of course, the precise tax position depends on the nature of the income and your circumstances. But for many small-scale earners, the change should make life considerably simpler.
What sorts of side hustles could benefit?
There are plenty of possibilities, and you don’t necessarily need specialist qualifications, expensive equipment or a large initial investment.
Here are a few ideas worth considering.
1. Online surveys and research studies
This is one of my favourite options because it is flexible, can be done from home and generally involves virtually no financial outlay.
You can earn money by completing surveys, participating in academic research, testing ideas and answering questions about your experiences or opinions.
One platform I particularly like is Prolific Academic, which connects members of the public with researchers conducting studies. The work can be more interesting than conventional consumer surveys, and you can choose when to participate.
I’ve written more about this in my article Here’s Why Prolific Academic Could Be the Ideal Side Hustle for Seniors.
Naturally, earnings vary according to the studies available and how much time you want to spend on the platform. It isn’t a replacement for a pension or salary, but it can provide a useful bit of extra spending money.
Other opportunities include website and app testing, paid market research and online focus groups.
2. Freelance writing
If you enjoy writing and have experience in a particular subject, freelance writing might be worth exploring.
Websites, businesses, publications and other organisations need articles, guides, reviews and other content. Your professional background or years of experience could give you a useful advantage.
You might write occasionally for a small payment or build up a modest stream of commissions over time.
There can be some initial effort involved in finding clients, but the work can often be done from home and scheduled around your other commitments.
3. Tutoring and coaching
Retirement doesn’t mean your professional knowledge and skills have lost their value.
If you have experience in teaching, accountancy, IT, engineering, business management, languages or another specialist area, you might be able to help other people develop their own skills.
This could involve online tutoring, one-to-one coaching or occasional sessions for local individuals and organisations.
You can often decide how many clients to take on and when to work.
4. Selling unwanted possessions
Many of us have accumulated books, collectibles, hobby equipment, clothes and other items that we no longer need.
Selling these online can be a useful way to raise extra cash, although there is an important tax distinction to understand.
Selling your own unwanted possessions is not automatically treated as trading income. If you are simply disposing of personal belongings, different tax rules apply. Buying items specifically to resell for a profit, or making and selling products as a business, is more likely to involve trading income.
The £3,000 trading allowance should not be confused with the separate rules governing the sale of personal possessions.
5. Website testing and market research
Companies often pay people to try out websites, apps or new products and give their opinions.
You might be asked to complete particular tasks on a website, explain what you find confusing or take part in an online discussion.
Some market research sessions pay more than ordinary surveys, although opportunities are not always available and you may need to meet specific eligibility criteria.
6. Pet sitting, dog walking and other local services
If you prefer getting out and about rather than sitting at a computer, you could consider pet sitting, dog walking, gardening help, ironing or other small services in your local area.
These activities may involve expenses, such as travel, equipment or insurance, so it is particularly important to understand how the trading allowance works before deciding whether to use it.
These are just some possibilities. For more inspiration, see my article The Best Realistic UK Side Hustles for Over-50s, which covers a range of practical ways to earn extra money without turning your retirement into another full-time job.
The important catch: £3,000 means gross income, not profit
There is one particularly important point to understand about the trading allowance.
The £3,000 limit refers to your gross qualifying income — in other words, the money you receive before deducting expenses.
If you earn £3,000 from a side hustle, you cannot deduct your costs and then use the allowance to shelter the first £3,000 of your remaining profit. You must choose between claiming the trading allowance and deducting allowable business expenses.
For example, suppose you run a small business making and selling craft items.
You receive £3,000 from customers but spend £1,200 on materials and other allowable expenses.
You could potentially claim the £3,000 trading allowance instead of deducting your actual expenses. However, you cannot claim both the allowance and those expenses against the same income.
In this particular example, the allowance would cover the full £3,000 of gross income, while deducting the £1,200 expenses would leave a profit of £1,800. Using the allowance would therefore be the more favourable option, assuming all the income qualifies and there are no other relevant complications.
For a business with much higher expenses, claiming actual expenses instead might be better.
This is why the new allowance is particularly attractive for side hustles with very low running costs.
Why online surveys could be an especially good fit
Consider someone who earns money through online surveys and academic research studies.
There is usually no need to buy stock, pay for specialist equipment or travel to customers. You can use a computer you already own, an internet connection you already pay for and whatever spare time you have available.
Suppose you earn £50 a month from surveys and research studies. That would amount to £600 a year.
At £100 a month, you would earn £1,200 a year. At £200 a month, you would earn £2,400.
From April 2027, all three amounts could fall within the £3,000 trading allowance, provided the income qualifies and the allowance is available to cover it.
| Monthly earnings | Annual gross income | Within the new allowance? |
|---|---|---|
| £50 | £600 | Yes |
| £100 | £1,200 | Yes |
| £200 | £2,400 | Yes |
| £250 | £3,000 | Yes |
| £300 | £3,600 | No — the excess needs to be considered under the applicable tax rules |
These figures are illustrations, not promises about how much you can earn. Survey and research opportunities vary, and some people will earn considerably less than others.
Also remember that the allowance applies to your combined qualifying trading and miscellaneous income, not £3,000 for every platform or side hustle you use.
Nevertheless, for people who enjoy online research activities, the higher allowance could provide a useful incentive to get started or spend a little more time earning money this way.
Does the allowance mean you can earn £3,000 without telling HMRC?
Broadly, that is the intention, but it is worth being precise.
The Government has announced that the trading allowance and the associated Self Assessment reporting threshold will both rise to £3,000 from 6 April 2027.
If your total qualifying gross trading and miscellaneous income is no more than £3,000 for the tax year, and you are entitled to use the allowance, you will generally not need to report that income through Self Assessment or pay Income Tax on it.
However, there are some important qualifications.
First, the allowance does not mean that every type of money you receive is automatically tax-free. Employment income, pension income, savings interest, rental income and income from other sources are subject to their own rules.
Second, if you have other reasons for completing a Self Assessment tax return, you may still need to submit one. You should not assume that the trading allowance removes that obligation.
Third, if your gross qualifying income exceeds £3,000, you will generally need to report it under the new rules. You may then be able to claim the trading allowance against your gross income or deduct allowable expenses instead, depending on which approach is appropriate.
Finally, selling personal possessions is subject to different rules from operating a trading business, so don’t assume that the trading allowance automatically applies to every sale you make online.
If you are unsure about your circumstances, the safest approach is to check the latest guidance on the GOV.UK website or seek advice from a qualified tax professional.
What about National Insurance and benefits?
The trading allowance is an Income Tax measure. It does not automatically exempt you from every other tax or reporting requirement that might apply to a particular activity.
For people earning small amounts from occasional side hustles, National Insurance is unlikely to be the main concern, but the rules depend on the nature and level of your self-employment income.
Likewise, if you receive means-tested benefits, additional earnings may affect your entitlement under the relevant benefit rules. The fact that income falls within the trading allowance for Income Tax purposes does not necessarily mean it can be ignored when assessing benefits.
Most importantly, don’t confuse the trading allowance with your Personal Allowance for Income Tax. The two are separate. The trading allowance can shelter qualifying side-hustle income, but your wider tax position still depends on your other income and circumstances.
My verdict: a welcome opportunity for small earners
I think the decision to raise the trading allowance from £1,000 to £3,000 is a welcome development, particularly for older people who want to earn a little extra money without taking on a conventional job.
It could encourage more retirees and semi-retirees to try a side hustle, make use of skills they have developed over a lifetime, or simply earn a little extra from home.
The key is to choose something realistic that suits your interests, circumstances and available time. I would be wary of any scheme promising large earnings for little effort, especially if it requires you to pay substantial upfront fees or buy expensive equipment.
For me, low-cost activities such as online research studies, surveys and website testing are particularly appealing because you can fit them around your existing lifestyle without making a major financial commitment.
The higher allowance won’t make anyone rich overnight, and it won’t remove every possible tax obligation. But it should make earning modest amounts on the side simpler and more attractive.
If you have been thinking about starting a side hustle, now could be a good time to explore your options and prepare for the change in April 2027. You could, of course, start in a small way now, taking advantage of the current £1,000 allowance, with a view to ramping up your activity from April next year.
And if (like me) you already have a side hustle, the new allowance may give you a bit more room to grow it.
- Have you tried earning extra money through online surveys, freelance work or another side hustle? I’d be interested to hear about your experiences and recommendations. Please leave a comment below as usual.
