The Government has announced that the annual threshold for reporting side hustle and small-scale trading profits will rise from £1,000 to £3,000. This move could remove up to 300,000 individuals from the self assessment tax system, as they would no longer be required to file a full return. Although the new measure aims to simplify tax reporting for part-time businesses and casual earners, it is not expected to take effect until 2027/28, pending the development of an alternative online service for reporting income.
Under current tax rules, anyone making more than £1,000 per year through side activities – from selling items online to offering dog-walking services – must file a self assessment return. This can cause confusion for taxpayers earning relatively small amounts. By increasing the threshold to £3,000, the Treasury hopes to ease administrative pressures and support those who are supplementing their main incomes with occasional freelance or entrepreneurial ventures.
Threshold increase will reduce confusion
Although the change means fewer people will need to complete annual tax returns, it does not remove their liability to pay tax on earnings above the original £1,000 limit. However, the Government intends to simplify the process of notifying and paying any tax dues. This reform is expected to benefit those engaged in low-level side hustles, such as occasional online sales or one-off contracts, by reducing paperwork and streamlining the current system.
In parallel, some experts argue that more could be done to simplify self assessment for other types of small-scale income, for instance, interest on savings. Concerned observers say that, unless thresholds for other categories are also increased, many individuals – particularly pensioners – will still be drawn into the formal tax system unnecessarily.
New service for accountants
Alongside the side hustle threshold announcement, HMRC has confirmed it will launch a dedicated escalation service for accountants and tax agents. The new system aims to reduce the frustration caused by long-standing queries around PAYE or self assessment. If an issue remains unresolved for more than four weeks, agents will be able to refer the matter to a team of experienced technicians who will take responsibility for finalising the case.
The ‘once and done’ approach is intended to enhance efficiency and communication, ensuring accountants have a single point of contact within HMRC for complex or overdue issues. This initiative is part of ongoing efforts to improve the overall service HMRC provides to tax professionals, particularly during the busy self assessment season.
On the broader subject of administrative burden, many in the accountancy profession welcome the upcoming threshold increase, noting that a boost to £3,000 could simplify the process for a significant number of taxpayers. However, some professionals also hope this is just the first step towards a wider overhaul of self assessment, suggesting the Government should consider further threshold increases in other areas of personal taxation.
Treasury minister James Murray, speaking at an ICAEW/CIOT conference, said:
“Up to 300,000 people, including those with side hustles, will no longer need to file a self assessment tax return but will be able to notify earnings online and pay their tax bill. 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.”
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