Up to 300,000 people earning extra income – in what is known as a ‘side hustle’ – may be given an escape from the administrative burden of self-assessment.
The government has announced reforms to the self-assessment system today (11 March) that could mean people who make extra money on the side beyond their typical job such as by selling clothes online or dog walking, may no longer have to file a tax return.
It comes as increasing numbers of people have been caught by the self-assessment net in recent years due to frozen tax thresholds. The dividend and capital gains tax allowances have also been slashed, upping the amount of tax to pay on assets.
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Exchequer secretary to the Treasury James Murray said this afternoon that by the end of this parliament the government will alter the thresholds for how much trading income a person can earn before having to report the earnings to HMRC.
These means you may no longer have to worry about the taxman when selling goods and services online.
It is the latest attempt by the government to boost the flailing economy by freeing up time for taxpayers to “create the conditions for economic growth.”
It has also been announced that HMRC will aim to improve its customer service by using generative artificial intelligence to point taxpayers to the advice they need on GOV.UK.
HMRC has also begun trialling a system where customers can use their voice as their password, to pass security checks faster and more securely.
Murray said: “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.”
How is ‘side hustle’ tax changing?
Currently, individuals have a trading allowance that makes them exempt on tax for the first £1,000 earned a year from what HMRC describes as casual services such as babysitting and gardening.
It can also be used when selling items on popular websites such as eBay and Vinted.
Since last year, digital platforms have been required to report information about the income of users directly to HMRC.
That means thousands of people who earn a bit of extra income from a ‘side hustle’ could get caught out by the taxman if they haven’t declared it.
But the trading income tax exemption is now set to be increased by £3,000.
No date was given for the change but Murray said it would be by the end of this parliament, which would mean by 2029.
Will I have to pay tax on my ‘side hustle?’
The Treasury estimates that raising the trading income threshold from £1,000 to £3,000 will benefit around 300,000 taxpayers.
An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all.
Others will be able to pay any tax they owe through a new simple online service.
