Brits with side hustles will be able to keep more of their money without paying tax from next year. In his first Budget as Chancellor on October 28, John Healey unveiled a series of measures to help entrepreneurs and start-up businesses.
He said: “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.”
Policy aims to simplify tax for small-scale business activities
A policy paper on the measure published on the day of the Budget explained that it is “intended to provide additional income tax relief for individuals with trading or miscellaneous income and to further simplify the tax treatment of small-scale business activities”.
“By increasing the amount of income that is covered by the allowance, the measure will reduce the number of individuals required to calculate taxable profits or submit a Self Assessment tax return to HMRC in respect of this income, thereby reducing administrative burdens,” it added.
The paper explained that the measure is expected to have an impact on people with small amounts of this extra income. The Government estimates that up to 1.4 million individuals could benefit from the trading allowance, either through a reduction in their tax bill or a simpler administrative process.
Estimated benefits for up to 1.4 million individuals
Of the 1.4 million individuals who could potentially benefit, 400,000 are estimated to see an average reduction of £380 in their tax bill, and 100,000 are estimated to no longer need to report their trading income to HMRC.
The change will come into effect from April 6, 2027, for the tax year 2027 to 2028 onwards. In the spring of last year, the Government announced that the Income Tax Self Assessment reporting threshold for trading income would be upped to £3,000 by the end of this Parliament; this has now been moved forward to coincide with the trading allowance change (April 6).
Other changes announced at the fiscal event for entrepreneurs include the launch of a new Young Entrepreneurs Allowance, “which will cover a year of living costs for young founders while they turn their ideas into businesses”, Mr Healey said.
Additional measures for founders and fast-growth firms
“And as recommended by the Women in Tech taskforce, I’m also announcing a new scale-up programme to support female founders, and the British Business Bank will double its commitments to women-led businesses and funds to £200 million,” he added.
“We need to get the best talent into our fast-growth firms, and so I’m reforming skilled worker visas and non-compete clauses in contracts, so that people who help build one successful company can move easily onto the next.
“And building on our world-leading EMI scheme, today I’m launching EMI2 – doubling the generosity of the Company Share Option Plan, so more companies can hire and retain top talent as they grow.”
