Budget 2026: The New Changes From April 2027 for Side Hustlers, Online Sellers and New Sole Traders

If you run a side hustle or you have just started out as a sole trader, the biggest news in today's Budget is that the Trading Allowance is tripling from £1,000 to £3,000. That change starts on 6 April 2027, not now. The tax returns you are filing this winter, for 2025/26, and next winter, for 2026/27, still use the old £1,000 allowance.

I have been through the full Budget document published by HM Treasury on 28 October 2026 and pulled out some of the key changes that will affect people at the start of their business journey, with the date each one starts. Most of the other headlines, from business rates to share schemes, is highly unlikely to affect you.

Which Budget changes affect side hustlers and new sole traders?

The Budget changes that affect people with a side hustle or a new sole trader business mostly start on 6 April 2027. Here they are in date order, taken from the Budget document itself.

When does the £3,000 Trading Allowance start, and does it change my 2025/26 or 2026/27 tax?

The £3,000 Trading Allowance starts on 6 April 2027 and applies from the 2027/28 tax year, so it does not change your 2025/26 or 2026/27 tax at all.

The Budget document says the government will increase the Trading Allowance "from £1,000 to £3,000, allowing individuals to receive up to £3,000 of trading and miscellaneous income tax-free each year", taking effect from 6 April 2027 through Finance Bill 2026-27.

That timing matters, because I expect a lot of people to hear "£3,000 tax-free" and assume it applies to the return they are about to file. It does not. The £1,000 remains for now

If your trading income was over £1,000 in 2025/26, you still need to file that return by 31 January 2027. If you haven't registered yet, my guide to the 5 October registration deadline explains what to do now.

Will I still need to file a Self Assessment return if I earn under £3,000?

The Budget document does not say whether people with trading income under £3,000 will still need to tell HMRC or file a return from 2027/28, so I would wait for HMRC's guidance before assuming you won't.

What it does say is that the income will be tax-free. Under today's £1,000 allowance, someone with trading income of £1,000 or less does not need to report it, so it's reasonable to expect the same approach at £3,000. I will update this post when HMRC confirms.

Until then, the rules for 2026/27 haven't moved: if your trading sales go over £1,000 between 6 April 2026 and 5 April 2027, you need to register for Self Assessment by 5 October 2027.

Should I claim the £3,000 allowance or my actual expenses?

You should claim whichever gives you the bigger deduction: the Trading Allowance or your actual business costs, because you can't claim both in the same tax year.

From April 2027, the allowance will beat actual costs for far more people. But if your costs are high, nothing changes for you, and these three composite examples show why. Each person also has a full-time job, so every pound of profit is taxed at the 20% basic rate, and none of them has profit high enough for Class 4 National Insurance.

Mia and Priya, who have low costs, are the big winners. Dan resells stock, so his costs are already higher than £3,000 and the new allowance makes no difference to him. That's why I'd never tell a reseller to stop recording their costs because of this Budget.

What's the new mileage rate, and when can I use it?

The mileage rate for the first 10,000 business miles in a car or van is 55p a mile from 6 April 2026, and the Budget has made it permanent.

The government first announced 55p as a temporary rate in May. The Budget also raises the rate for miles above 10,000 from 25p to 35p, from 6 April 2027. For the 2025/26 tax year, the old 45p rate still applies.

So if Dan drives 1,200 business miles in 2026/27 to car boot sales and the post office, he can claim 1,200 × 55p = £660, compared with £540 at the old 45p rate.

Mileage is one of your actual costs, so if you claim the Trading Allowance instead of your actual costs, you can't claim mileage on top. Keep a mileage log either way, so you can compare the two.

Will Vinted or eBay start charging me VAT?

Vinted, eBay and other online marketplaces won't start collecting VAT on your sales unless you're VAT-registered or you sell more than £90,000 a year on a single platform.

The Budget extends the online marketplace VAT rules to UK sellers from 1 October 2027, but the document says the rules "will not apply to non-business (i.e. personal) sales, second-hand goods, or business-to-business transactions". If you sell your own clothes, resell second-hand stock or run a small handmade shop, this doesn't affect you.

Does anything change for Making Tax Digital?

The Making Tax Digital thresholds stay the same, but people who join in April 2027 won't get penalty points for late submission of their first four quarterly updates in 2027/28.

Making Tax Digital for Income Tax still applies from 6 April 2027 if your sales from self-employment and property were over £30,000 in 2025/26, and from 6 April 2028 if they're over £20,000 in 2026/27. The Budget says the government is deferring the rollout to "several taxpayer groups until further notice", but it doesn't name those groups. [VERIFY: which groups are deferred, once HMRC publishes details.] Most beginners are well under these thresholds, as I explained in my guide to Making Tax Digital for side hustlers.

What else changes after 2027?

A few more Budget changes could affect you as your business grows: the rental and savings change starts on 6 April 2027, and the rest start in 2029.

• Tax on rental and savings income rises by 2 percentage points from 6 April 2027, to 24% basic rate, 44% higher rate and 49% additional rate. This only matters if you also rent out property or have savings interest above your allowances.

• Payments on account change from April 2029. If your Self Assessment bill is over £1,000 and you already make payments on account, you'll make smaller, more regular payments during the year instead of two large ones. My guide to payment on account explains how the current system works.

• Parental pay opens to eligible self-employed fathers, partners and adopters from April 2029.

• HMRC debt collection changes from July 2029, when HMRC can take smaller tax debts directly from the bank accounts of people who can afford to pay but repeatedly don't.

If you claim Universal Credit alongside your side hustle, the Budget also keeps the £2,500 surplus earnings threshold for another year from 1 April 2027.

Do I still need to keep records if my side hustle will be tax-free?

Yes. I'd always recommend keeping records, even if you expect to stay under £3,000.

You need records to know if you're under £3,000 in the first place, and the test is your sales, not your profit. Platforms such as Vinted, eBay and Etsy still report sellers to HMRC once they reach 30 sales or about £1,700 in a calendar year, so if HMRC ever asks, your records are how you show the income was covered. And as Dan's example shows, if your costs are higher than the allowance, they're worth more than the allowance, but only if you've recorded them.

For the 2025/26 and 2026/27 returns, nothing has changed: over £1,000 of trading income means registering, keeping records and filing. If you're pulling together your 2025/26 figures now, the 2025/26 Bookkeeping and Accounting Template brings your income and costs together in one place before the 31 January 2027 deadline.

Frequently asked questions

When does the £3,000 Trading Allowance start?

The £3,000 Trading Allowance starts on 6 April 2027 and applies from the 2027/28 tax year. Your 2025/26 and 2026/27 tax returns still use the £1,000 Trading Allowance.

Will I still need to file a Self Assessment return if I earn under £3,000?

The Budget document doesn't say whether people with trading income under £3,000 will need to report it from 2027/28. HMRC is expected to publish guidance, so don't assume you won't need to file until it does.

Should I claim the £3,000 Trading Allowance or my actual expenses?

Claim whichever gives the bigger deduction, because you can't claim both in the same tax year. The allowance will usually win if your costs are under £3,000, while sellers with higher costs, such as resellers, will usually still do better claiming actual expenses.

What is the mileage rate for the self-employed in 2026/27?

The mileage rate is 55p a mile for the first 10,000 business miles from 6 April 2026, and the Budget has made it permanent. Miles above 10,000 are 25p a mile in 2026/27, rising to 35p from 6 April 2027.

Will Vinted or eBay charge VAT on my sales from October 2027?

Only if you're VAT-registered or you sell more than £90,000 a year on one platform. The new online marketplace VAT rules don't apply to personal sales, second-hand goods or business-to-business sales.

Do I still need to keep records if my side hustle will be tax-free?

Yes. Records show if you're under £3,000, help you answer HMRC if a platform reports your sales, and tell you whether your actual costs beat the Trading Allowance.

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