Are you earning extra income through a side hustle? A significant change to the UK tax system could make reporting your earnings easier. The UK government has announced plans to raise the Income Tax Self Assessment (ITSA) reporting threshold from £1,000 to £3,000, reducing the administrative burden for thousands of self-employed individuals.
What Is Changing?
James Murray, the tax minister responsible for HM Revenue and Customs (HMRC), recently announced this simplification during a speech marking HMRC’s 20th anniversary. Previously, individuals earning over £1,000 from self-employment or a side hustle needed to submit a self assessment tax return. With the proposed increase to £3,000, an estimated 300,000 people will no longer need to file a tax return, making tax compliance much simpler.
Who Will Benefit from This Change?
This new threshold will benefit self-employed individuals, freelancers, and side hustlers who earn up to £3,000 in additional income. This includes those making money from:
- Online selling (e.g., reselling clothes, handmade crafts, dropshipping)
- Freelancing (e.g., graphic design, copywriting, consulting)
- Pet sitting or dog walking
- Gardening and handyman services
- Content creation (e.g., YouTube, blogging, social media influencing)
Understanding the Trading Allowance
It’s important to note that while the reporting threshold is increasing, the £1,000 trading allowance remains unchanged. This means:
- If your side hustle earns less than £1,000 per year, you don’t need to report it to HMRC.
- If your side hustle earns between £1,000 and £3,000, you may still need to report your income through an online service, but a full self assessment tax return may not be required.
- Any income above the £1,000 trading allowance will be taxable after deductions.
When Will This Take Effect?
While no specific date has been confirmed, the government has stated that the change will happen “within this Parliament”. This means we could see the new threshold implemented within the next few years.
What Should You Do Next?
If you have a side hustle and are unsure whether you need to complete a tax return, we’re here to help. At EOACC, we specialize in tax planning, self assessment filing, and small business accounting. Our expert team can ensure you stay compliant while minimizing the tax you owe.
Contact us today to discuss your tax obligations and make sure you’re fully prepared for these upcoming changes.
Read the full government announcement here: UK Government News.