Government Announces Tax Reporting Threshold Increase for Side Hustles

In a significant move aimed at simplifying tax obligations and fostering entrepreneurial endeavours, the UK government announced plans last month to raise the Income Tax Self Assessment (ITSA) reporting threshold for trading income from £1,000 to £3,000. This change is expected to exempt approximately 300,000 individuals with side incomes from the requirement to file self-assessment tax returns, allowing them to focus more on growing their ventures. ​ 

This change will benefit people earning extra income from activities like selling clothes online, dog-walking, gardening, taxi driving, or content creation.

Understanding the Threshold Increase

Currently, individuals earning over £1,000 from additional activities such as selling goods online, offering freelance services, or engaging in gig economy roles are required to file a self-assessment tax return. The proposed increase to a £3,000 threshold means that those earning up to this amount will no longer need to undertake the process of filing these returns. This adjustment aims to alleviate administrative burdens, particularly for those managing small-scale side businesses. ​

Implications for Taxpayers

It's crucial to note that while the reporting threshold is set to increase, the tax-free trading allowance remains unchanged at £1,000. This means that individuals earning between £1,000 and £3,000 will still be liable for tax on income exceeding the £1,000 allowance. However, instead of filing a full self-assessment tax return, they will have the option to report this income and pay any due taxes through a new simplified online service. This development is intended to streamline the tax payment process, making it more accessible for taxpayers.

Government's Perspective

Exchequer Secretary to the Treasury, James Murray, emphasised the government's commitment to supporting entrepreneurial activities and reducing bureaucratic obstacles.

He stated:

“From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit. 

Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.

We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people’s pockets.”

This initiative reflects the government's broader strategy to modernise HM Revenue & Customs (HMRC) and create an environment conducive to economic growth. ​

Broader Economic Impact

The adjustment is anticipated to benefit a diverse group of individuals engaged in various side hustles, including online sellers, freelance professionals, and gig economy workers. By reducing administrative requirements, the government aims to encourage more individuals to explore and expand additional income streams, thereby contributing to the broader economy.

Implementation Timeline

While the announcement has been made, the exact timeline for the implementation of this change remains unspecified. The government has indicated that the increase in the reporting threshold is expected to take effect "within this parliament," which could extend up to 2029.

Individuals currently earning between £1,000 and £3,000 from side activities should continue to comply with existing tax reporting requirements until the new threshold is officially enacted. ​ 

Expert Support to Keep You Compliant and Confident Amid Changing Tax Rules

As the implementation timeline extends over the coming years, affected individuals should stay informed and continue to comply with existing tax obligations until the new measures take effect. Styles & Associates can provide valuable support during this transition, providing self-assessment services including allowable expenses, and income reporting for side hustles and freelance work.

With a proactive approach and up-to-date knowledge of evolving tax legislation, Styles & Associates helps clients stay ahead—saving time, reducing stress, and maximising financial confidence. Get in touch with our team to discuss your requirements.

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Source: Gov.uk