If you earn money on the side, the rules on reporting it are shifting. The government has confirmed it intends to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000. The change is expected to take effect in the 2027/28 tax year, with a simplified online service for smaller amounts.
It sounds like a tax cut for side hustlers. It isn’t. The tax-free trading allowance stays at £1,000. What’s rising is only the point at which you must file a full return. Tax can still be due on income between the two figures.
At the same time, HMRC sees more of this income than ever. Platforms now report seller data directly. Here’s what’s actually changing, and what it means for you.
Side Hustle Tax: What’s Changing and What Isn’t
Two separate numbers are at work here, and mixing them up is where people go wrong.
The trading allowance is £1,000. Earn less than that from trading in a tax year and there’s no tax to pay and nothing to report. That allowance is not changing. It stays at £1,000.
The reporting threshold is the figure that’s rising to £3,000. That’s the point above which you must register for Self Assessment and file a return. So from 2027/28, if your gross trading income sits between £1,000 and £3,000, you won’t need a full return. Instead, HMRC plans a simplified online service to declare and pay any tax owed.
Read that last line again. Tax may still be owed. The reporting route gets simpler, but the income between £1,000 and £3,000 doesn’t become tax-free.
What Counts as a Side Hustle
A side hustle isn’t only online selling. It’s any trading or services income earned alongside your main work.
It covers selling on eBay, Vinted or Etsy as a trade. It covers letting a room or a property on Airbnb. It covers tutoring, dog walking, consulting, content creation and weekend trade work. If you’re providing goods or services for profit, it’s trading income, whatever the platform.
There’s a line that matters here. Selling your own unwanted possessions isn’t trading. Buying or making things to sell is. Where you sit on that line decides whether you owe anything at all, and it’s not always obvious.
HMRC Already Sees the Income
The old assumption was that small online income stayed invisible. That assumption is gone.
Digital platforms now report seller and host data to HMRC under reporting rules in force since 2024. Marketplaces and letting sites pass over what their users earn. HMRC matches that data against what people declare, and sends prompts where the two don’t line up.
So the risk has changed shape. It’s no longer about whether HMRC finds out. It’s about whether your declared position matches the data they already hold. A mismatch is what triggers a letter, and then a closer look.
Why This Is Harder Than It Looks
On the surface, a higher reporting threshold means less admin. Underneath, the change adds traps.
The biggest is the gap between the two numbers. People hear “£3,000” and assume income under it is tax-free. It isn’t. If your personal allowance is already used up by a job, trading profit between £1,000 and £3,000 is taxable, even though no full return is needed. Get that wrong and you’ve underpaid.
The trader-or-not question is the other trap. Whether your activity is a trade, casual income or just selling old belongings changes everything, and HMRC has detailed tests for it. The trading allowance also works on gross income, not profit, so claiming it can cost you more than claiming actual expenses. Choosing the wrong one quietly raises your bill.
Timing adds a final wrinkle. The £3,000 threshold is expected, not yet in force, and it arrives as Making Tax Digital reshapes how trading income is reported. Knowing which rules apply to which year is its own task.
Who Should Take a Closer Look
If your side income is creeping up, this is the moment to get your position straight.
It matters most if you have a job using your personal allowance and a growing side income on top. It matters if you let property or rooms. And it matters if you’ve had a prompt from HMRC, or sold enough through a platform that one may be coming.
None of this means panic. It means knowing, before HMRC asks, whether you owe anything and how to report it cleanly.
How Hamlyns Can Help
We work out whether your side income is taxable, and how much. That’s the question most people can’t answer with confidence, and it’s the one that matters.
We tell you whether you’re trading or not. We check whether the allowance or your actual expenses leave you better off. We get your reporting right for the correct tax year, full return or simplified service. And if a prompt has already arrived, we handle the response and the disclosure properly.
If your side hustle is growing and you’re unsure where you stand, please get in touch with the Hamlyns team. You can also read our guides on whether you need to complete a Self Assessment return and what happens if you fail to declare income to HMRC. We’ll give you a clear answer in plain English, before the question becomes a problem.
