Higher tax threshold for side hustles: What could it mean for you?
Last week, the tax minister responsible for HM Revenue and Customs (HMRC), James Murray, delivered a speech marking the 20th anniversary of HMRC. Previously, the UK’s tax authority was known as Inland Revenue.
During the speech he highlighted some simplifications that are planned. Of particular interest was the announcement of plans to increase the Income Tax Self Assessment (ITSA) reporting threshold for gross income from £1,000 to £3,000.
Who would benefit from this change?
This threshold would apply to anyone with a self-employed trading income, however it can be particularly useful to those with a side hustle. A side hustle is an income-generating activity that is pursued alongside a full-time job or main source of income.
Some have a side hustle for trading clothes online, doing some dog-walking or gardening, or creating online content. Currently if income from these activities exceeds £1,000 then it is likely that a tax return needs to be completed and filed.
However, if the threshold is increased to £3,000 it is estimated that up to 300,000 people will no longer need to complete a tax return. This could be very welcome news for some, although it is important to remember that the £3,000 threshold relates to the requirement to submit a self assessment tax return – the £1,000 trading allowance will not change. Someone with a side hustle that generates £1,200 of income would need to report their trading income through a new online service and will pay tax on the £200 after the £1,000 trading allowance has been deducted.
When will this happen?
Unfortunately no definite date has been mentioned, only the promise that it will happen “within this parliament”. So, we may have a few years yet.
If you would like to know whether you need to complete a tax return for your self employed business or side hustle please get in touch. As tax experts we can help you minimise any tax you owe and would love to help you!
See: https://www.gov.uk/government/news/boost-for-side-hustlers-as-300000-people-to-be-taken-out-of-tax-returns-government-announces#full-publication-update-history
For many sole traders and small business owners, reviewing their accounting system only happens when something forces the issue. For instance, many sole traders are currently looking at whether their accounting system meets the requirements for Making Tax Digital for Income Tax.
UK inflation eased to 3.6% in the year to October, down from 3.8% in September, according to the latest figures from the Office for National Statistics (ONS).
