The government plans to introduce the allowance on 6 April 2027 through Finance Bill legislation, while limiting heat-pump funding growth to inflation instead of the earlier planned increase.
The UK government’s Budget proposes raising the tax-free trading allowance from £1,000 to £3,000 from 6 April 2027. Chancellor John Healey also reduced previously planned Boiler Upgrade Scheme funding by 741 million pounds, replacing its planned expansion with growth only in line with inflation.
In spring 2025, the government had already promised to raise the trading-income tax-return reporting threshold to £3,000 by the end of Parliament. The Budget sets an implementation date and also proposes raising the tax-free allowance itself.
The trading allowance covers small amounts of income from providing goods or services and other miscellaneous income. Under the current £1,000 allowance, earnings above that level may attract tax if total income, including wages, exceeds the £12,570 personal allowance.
| Potential effect | Estimated number of people |
|---|---|
| Tax relief or simpler administration | Up to 1.4 million |
| A lower tax bill, with an average saving of £380 | 400,000 |
| No longer required to report trading income to HM Revenue and Customs | 100,000 |
Sarah Coles, AJ Bell’s head of personal finance, told the
Trading for profit differs from selling unwanted possessions. Selling your own clothes or other items for less than you originally paid is not taxable because you have made no profit.
The allowance increase still requires legislation. The government proposes changing the Income Tax (Trading and Other Income) Act 2005 through Finance Bill 2026–27. Its planned start date also applies to the higher Self Assessment threshold for reporting trading income to HM Revenue and Customs.
The Boiler Upgrade Scheme helps households replace gas boilers with electric heat pumps. A typical household can claim 7,500 GBP towards a heat pump. About 60,000 are fitted annually in existing homes, against the government’s target of 250,000 a year by 2030.
The government had planned to increase the scheme’s funding from £400m in 2026 to just over £700m by 2029–30. Ministers have instead announced inflation-linked growth. The 741 million pounds reduction is measured against that earlier funding plan.
Andrew Sissons, a director at research charity Nesta, said the cuts made it very difficult to see how clean-heating targets could be met. Ed Matthew, the UK programme director at thinktank E3G, criticised the subsidy cuts and said heat-pump uptake needed a major increase, with the UK behind many other countries.
The UK energy department said it remained committed to meeting the heat-pump target. It said clean domestic power would protect consumers from volatile fossil-fuel prices.
| Programme | Funding reduction |
|---|---|
| Warm Homes Plan | About £250m |
| Hydrogen schemes | £500m |
| Carbon capture and storage technology | £200m |
Healey said cuts to other departments would partly fund the defence investment plan. He also announced that renewable projects would receive approval only if they could demonstrate lower costs and readiness to connect to the electricity grid.
The Budget also announced a long-term move to shift green costs from energy bills to taxpayers. The government intends to make electricity prices less closely tied to gas prices. Allies of former energy secretary Ed Miliband and his successor, Miatta Fahnbulleh, said that change would encourage consumers to move away from fossil fuels.
Analysis
The Institute for Fiscal Studies estimated that an additional 28 billion pounds a year would be needed to offset inflation’s effect on future spending plans and reach defence spending of 3% of gross domestic product—the size of the economy—by 2030. That estimate depends on meeting both objectives.
Helen Miller, the institute’s director, warned that the next spending review could bring inflation-adjusted cuts for some departments. She said public-service spending plans were extremely tight and could lead to renewed speculation about tax rises.
Healey clarified on 29 October that the government had set no timetable for reducing welfare spending. He had initially appeared to promise a reduction before the next election, but Treasury officials said he had not intended to give a timeline. Welfare spending is outside the spending review, which covers departmental budgets.
The Office for Budget Responsibility forecasts welfare spending will rise from £334 billion in 2025 to £431 billion by 2030, with the overall forecast £8 billion higher than in March. About half goes to pensioners and a quarter to sickness and disability benefits. Healey pointed to forthcoming reviews by Alan Milburn on employment support for young people and Stephen Timms on disability benefits. Milburn is expected to recommend upfront spending to help more young people into work and reduce costs over the longer term.
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