Having a clear out or selling for profit? What the new rules on trading allowances mean for your side hustle

An award winning consumer expert has shared her advice for people who make extra cash from side hustles following the changes to the tax free trading allowance. 

Jane Hawkes, who runs the money and consumer advice website ladyjaney.co.uk, says people who have side hustles reselling goods on platforms such as Vinted or selling their home made products online need to watch out for changes the laws.

“Whether it's selling unwanted clothes on Vinted, making jewellery to sell online, walking dogs, tutoring, baking cakes or turning a hobby into a small business, side hustles are becoming an increasingly popular way to boost household income,” says Jane.

“With household budgets under pressure, earning a little extra money can make a real difference. It can also be a way to turn a passion or spare-time activity into something more rewarding financially.

“The good news is that the government has announced an increase in the tax-free trading allowance from £1,000 to £3,000. However, there are some important distinctions between selling your own unwanted belongings and actively trading for profit, and it's worth understanding the rules before you start.

“One of the biggest areas of confusion is between those selling unwanted personal possessions or professional sellers. 

“If you’re the former, you don’t need to pay income tax. But if you buy something with the intention of selling it on for a profit, that counts as trading.”

Jane has put together a summary of what you need to know if you are making extra cash from hobbies or reselling. 

 What is changing?

Following the Budget announcement on 28 October 2026, the government confirmed that the trading allowance will increase from £1,000 to £3,000 from 6th April 2027. This means individuals will be able to receive up to £3,000 in qualifying trading or miscellaneous income covered by the allowance, without paying income tax on that income.

The government is also increasing the Self Assessment reporting threshold for trading income to £3,000, which should reduce the administrative burden for people earning relatively small amounts from side hustles. Until the changes take effect, the existing £1,000 trading allowance remains in place.

 Selling unwanted belongings versus trading for profit

This is one of the biggest areas of confusion and it's important to understand the difference. If you're simply having a clear-out and selling unwanted personal possessions, such as clothes, toys, furniture, books or household items, you generally don't need to pay income tax on those sales.

However, if you start buying items specifically to resell at a profit, making products to sell or regularly offering goods and services commercially, HMRC is likely to regard this as trading.

Don't assume that every sale made through eBay, Vinted or Facebook Marketplace is taxable. Equally, don't assume that calling something a hobby means HMRC won't regard it as trading.

 Is the £3,000 allowance on top of your normal tax-free allowance?

The £3,000 trading allowance is completely separate from the standard Personal Allowance, currently £12,570 and is a separate tax relief which can be used against qualifying trading income. This means you can benefit from the trading allowance even if you're already working and paying tax through PAYE.

For example, someone earning £30,000 through their main job who makes an additional £2,500 from a qualifying side hustle could claim the trading allowance against that additional income, leaving no taxable trading profit. If they earn £4,000, they could claim the £3,000 allowance, leaving £1,000 of taxable trading profit.

Do I need to tell HMRC?

At present, if your total gross trading income exceeds £1,000 in a tax year, you will generally need to tell HMRC and may need to register for Self Assessment. From April 2027, the Self Assessment reporting threshold for trading income will increase to £3,000.

Don't assume that having a full-time job means everything is automatically taken care of. Your employer deals with the tax on your salary through PAYE but additional self-employed income is your responsibility to declare where required.

What about selling on eBay, Vinted and other online marketplaces?

Since January 2024, online platforms have been required to collect certain seller information and report relevant sales information to HMRC. Generally, platforms may need to report sellers who make 30 or more sales of goods in a calendar year, or receive at least €2,000 (approximately £1,700) from those sales. However, this does not mean you automatically owe tax if you sell 30 items or more.

If you're selling your own unwanted belongings, you generally won't owe income tax simply because you have sold lots of items. If you're buying or making goods to sell for profit, the trading rules are different.

 What should you do to avoid getting caught out?

Even if your side hustle is relatively small, it's sensible to treat it like a business from the outset.

Keep a record of your sales, income and expenses. A simple spreadsheet can be enough to start with. Record money received, materials purchased, postage, packaging, advertising and any platform fees. Don't wait until the end of the tax year to work out how much you've earned.

Don't confuse sales revenue with money you actually make. Postage, packaging, fuel, materials, insurance and marketplace commissions can all eat into your earnings.

Work out what you are genuinely making after expenses and consider whether the time involved is worthwhile.

If you use the £3,000 trading allowance, you cannot also deduct your actual business expenses against that same income. Compare the two approaches to see which is more beneficial.

If your side hustle grows beyond the allowance, you could have an additional tax bill. Don't spend every penny you make without considering whether some needs to be put aside.