Up to 300,000 people with side hustles ranging from selling clothes online to dog walking are to be freed from the chore of having to do a self-assessment tax return.
The government said this week it wanted “to make it easier for Britons to make the very most of their entrepreneurial spirit”.
But this move is also about taking some of the pressure off HM Revenue & Customs, which has faced harsh criticism for its poor customer service including long call waiting times. This year, more than 12 million people had to submit a self-assessment tax form – up from just over 10 million a decade ago.
As Laura Suter at the investment platform AJ Bell explains, many people who earn money from a second job or have a side hustle will be pleased to hear that the amount they can earn before having to file a self-assessment return will triple in the coming years. The government has announced that people will be able to earn £3,000 a year from “trading income” before they have to fill in a tax return – up from the current £1,000.
But, crucially, this change does not mean those people will pay less tax – just that they will not have to file a tax return for that income until they hit £3,000.
They will still have to pay the tax on any trading income above £1,000. The government has indicated that people will be able to pay any tax they owe via “a new simple online service”.
Under UK law, everyone has a trading allowance each tax year, which means they can earn up to £1,000 without paying tax, and that is unaffected by this week’s announcement.
The accountancy firm BDO says that instead of filing a return, someone with a trading income from side hustles of between £1,000 and £3,000 a year will have to pay what they owe via a simple tax bill – or, perhaps, through their PAYE tax code.
The government says those who will benefit range from people who trade vintage clothes or do dog walking or gardening on the side to people who drive a taxi or make some money from being a social media influencer.
However, the changes are earmarked to take effect “within this parliament”. So in theory, that could mean waiting until 2029.
