New Tax Rules for Side Hustlers: What You Need to Know

In a significant shift aimed at easing the tax burden on side hustlers, HMRC has announced that it will raise the trading income threshold from £1,000 to £3,000. This change, set to be implemented by the end of 2029, will exempt many from the need to file a self-assessment tax return, allowing them to focus more on their entrepreneurial ventures.

Key Takeaways

• The trading income threshold will increase from £1,000 to £3,000.

• Up to 300,000 individuals will no longer need to file tax returns.

• A new online service will simplify tax payments for low earners.

• HMRC will adopt a US-style informant scheme to tackle tax evasion.

Overview of the Changes

Under the current rules, anyone earning less than £1,000 from side hustles is exempt from tax and does not need to declare their income. However, those earning even a pound over this threshold must file a tax return. The new regulations will allow individuals to earn up to £3,000 without the need for a self-assessment, although they will still be liable for tax on any income exceeding £1,000.

James Murray, Exchequer Secretary to the Treasury, stated, "We are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit." This move is expected to significantly reduce the administrative burden on those engaging in side hustles, from selling items online to freelance work.

Implications for Side Hustlers

The changes are anticipated to benefit a wide range of individuals, including those who sell clothes on platforms like Vinted or eBay. Here are some implications of the new rules:

• No More Tax Returns: Approximately 300,000 people will be exempt from filing self-assessment tax returns, simplifying their financial obligations.

• Simplified Tax Payments: Individuals with lower trading incomes will be able to pay their taxes through a straightforward online service or via their PAYE tax code, making the process more user-friendly.

• Tax Obligations Remain: While the reporting threshold increases, individuals must still pay tax on earnings above £1,000, ensuring that the government continues to collect revenue from side hustlers.

New Informant Scheme

In addition to the changes in tax reporting, HMRC is set to introduce a new scheme to encourage informants to report tax evasion. This initiative will offer higher rewards for whistleblowers, aligning HMRC's practices with those of the IRS in the United States. Experts believe that this could lead to significant recoveries of unpaid taxes, as it aims to attract more serious reports of tax fraud.

Kate Ison, a partner at an international law firm, commented on the necessity of such incentives, stating, "There need to be serious incentives to encourage whistleblowers to come forward in such cases as well as appropriate legal safeguards."

Conclusion

The recent changes to HMRC's tax rules for side hustlers represent a progressive step towards supporting the growing gig economy in the UK. By raising the income threshold and simplifying tax obligations, the government aims to foster entrepreneurship while ensuring compliance with tax laws. As these changes roll out, side hustlers can look forward to a more manageable tax landscape, allowing them to focus on growing their ventures without the burden of excessive paperwork.

Sources

• HMRC makes major change to side hustle tax and will adopt US-style snoop scheme to tackle tax evasion, This is Money.