The Trading Allowance Triples, but HMRC Keeps the Sellers’ Sales Data

Take £2,500 of sales on Vinted in the tax year that starts in April 2027. Under the new trading allowance, no tax return is needed for that income and no tax is due on it. HMRC will still hold the sales data, because the platform had to report them: the reporting line sits at about £1,700, and the Budget left it exactly where it was.

John Healey announced the change in the Budget on 28 October. “So for those just starting out, I’m tripling the trading allowance — the amount you can earn from a new venture tax-free — from £1,000 to £3,000,” the Chancellor said. The rise takes effect on 6 April 2027, for trading and miscellaneous income, through the Finance Bill 2026-27. Until then the £1,000 rule governs the whole of the current tax year, including the Christmas selling season. Anyone who still has to register for Self Assessment must do so by 5 October after the tax year ends. The government’s impact note puts the beneficiaries at up to 1.4 million people, with 400,000 paying £380 less tax on average and 100,000 no longer needing to report their trading income at all.

The reporting line sits below the tax line. Between about £1,700 and £3,000, a seller of goods is reported to HMRC in full. No return is owed for the income. The gap is roughly £1,300 wide. It didn’t exist under the old £1,000 allowance, when the reporting line stood above the tax line. The exclusion covers a seller who takes €2,000 or less in fewer than 30 sales of goods in a year.

Only goods are covered by the exception. It does not apply to the provision of services, the rental of transport, or the rental of immovable property, so a tutor, a dog-walker or a delivery driver is reportable from the first payment, however small. Tutoring and dog-walking were the examples the announcement coverage reached for, and they are precisely the categories with no reporting floor. The two systems also count different years. Platforms report on the calendar year, while the allowance runs from 6 April to 5 April, so the figure HMRC receives for a seller won’t normally be the figure that belongs on that seller’s return.

HMRC already holds seller data on a scale the announcement didn’t mention. Data supplied to the accountancy firm Lubbock Fine put 2.6 million people selling goods through platforms in the year ending 31 December 2025, up from 450,000 a year earlier. A separate freedom-of-information release to BDO counted 3,988,892 seller reports across every platform activity and every kind of seller. Individuals, companies, partnerships, trusts and charities were all included, with almost £55 billion of reported earnings, against 1,466,171 reports and £25.5 billion the year before. The two counts describe different populations, and HMRC has said the larger figure likely mixes individuals with entities.

Costs decide how much of the rise a seller keeps, because the allowance replaces expenses rather than adding to them. A person on a £30,000 salary with £4,000 of side-hustle receipts and £500 of expenses sees the tax on that income fall from £600 to £200, a saving of £400. With £2,500 of expenses the saving is £100, and with £3,500 of expenses it’s nothing at all, because the expenses already match the new allowance. The allowance also reduces the profit counted for Class 4 National Insurance, which is where a full-time sole trader gains most. On £20,000 of receipts and £500 of expenses, income tax falls from £1,286 to £886 and Class 4 from £386 to £266, a combined saving of £520.

For a claimant on Universal Credit, the gain is smaller than the tax saving. HMRC’s guidance states that income for Universal Credit purposes is not affected by the allowances, and the benefit tapers by 55p for every £1 earned above any work allowance. A £400 tax reduction therefore cuts Universal Credit by £220, leaving £180 of the saving in the claimant’s pocket.

The £1,000 figure hadn’t moved since the allowance began on 6 April 2017. In September 2025, eBay, Vinted, Depop and Etsy joined the Federation of Small Businesses, TechUK and Enterprise Nation in writing to the then Chancellor. They asked for exactly £3,000, arguing the limit’s value had been eroded by inflation and citing an extra £400 for basic-rate taxpayers. The government’s spring 2025 tax update had already announced a £3,000 Self Assessment reporting threshold for trading income. It was expected to take up to 300,000 taxpayers out of Self Assessment within this Parliament. The impact note presents the Budget change as implementing that rise alongside the allowance itself. Tina McKenzie, the Federation’s national chair, said her organisation was pleased “the Chancellor has acted upon our call to increase the Trading Allowance from £1,000 to £3,000”. The same release called the wider Budget a miss on small-business costs and jobs.

The Treasury has priced the measure at nothing in 2027-28, when the income is earned but the tax is mostly yet to be paid. The cost then runs £225 million in 2028-29, £165 million, £175 million and £180 million over the following three years, all certified by the Office for Budget Responsibility. The impact note puts the saving in administrative burden at £15.7 million a year, against a one-off IT cost of £725,000. People aged 35 to 64 make up 62% of those affected, against 46% of the UK adult population. The Budget raises the trading allowance only: the separate £1,000 property allowance doesn’t rise.

A second £3,000 figure already exists in the tax system and measures something different. The capital gains annual exempt amount stands at £3,000 for individuals, cut from £12,300 in 2022-23 to £6,000 and then £3,000 from 2024-25, but it applies to gains, profit after losses, while the trading allowance applies to gross receipts before expenses. One allowance covers all of a person’s eligible trades combined, not one per platform or per hustle, and it cannot be used for income from a person’s own company, a partnership, or an employer. Selling personal belongings for less than they cost remains outside both.

Records still have to be kept even when the allowance covers everything, HMRC’s guidance says. The allowance cannot be used to create a loss, and the records are what a seller would need if HMRC asks how the figures were worked out.