Confirmed! Increase in sole trader ‘trading allowance’ to £3,000
Last Updated on 3 November 2026
The Budget speech on 28th October 2026 was rather dull.
I was expecting some major tax fireworks, and was prepared to update all my tax bathtub graphics.
However one big meaty clarification was the tripling of the so-called ‘trading allowance’ for sole traders.
The trading allowance has two advantages for smaller sole trader businesses, including those who do a bit of sole trader freelancing on the side:
- You don’t even have to register as a sole trader until you earn more than the trading allowance from your sole trader activities. You just keep the money and it isn’t taxed.
- If you want to, you can use the trading allowance as the total of your tax-deductible business costs, without having to itemise your records of actual figures.
This makes doing a tax return very easy for sole traders with low costs.
Since it was introduced the trading allowance as been £1,000. It has not kept pace with inflation. But…
…from 6th April 2027 it’s going up to £3,000.
This will mean less admin for many of the freelancers I work with, particularly those who earn mainly from PAYE jobs, and do a bit of sole trader freelancing on the side.
They can now do up to £3,000 worth of sole trader-ing and just buy me a lovely present with it. It won’t be taxed.
Any downsides?
- If you’re already registered as a sole trader, using the trading allowance might make your record-keeping very simple. But remember that you can’t then use the separate capital allowances for any equipment you’ve bought in the same year.
- Don’t forget that this kicks in for the year starting 6th April 2027. The tax year 2026-27 still has a trading allowance of just £1,000.
- If you’re already submitting a tax return every year as a sole trader, you can’t just stop. Make sure you contact HMRC and check first if you can make changes.
- The property allowance for landlords isn’t changing.
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Posted on 02 November 2026
