The UK government has announced a move to simplify the tax process for up to 300,000 people with side hustles, such as selling items online or dog walking. These individuals will no longer have to file a self-assessment tax return unless their earnings exceed a certain threshold.
This change aims to reduce the burden on HM Revenue & Customs (HMRC), which has faced criticism for poor customer service, including long call waiting times. Over 12 million people submitted self-assessment forms this year, an increase from just over 10 million a decade ago.
Key Changes to the Tax System
Under the new plan, people with side incomes will be able to earn £3,000 per year from “trading income” before needing to file a tax return. This is a significant increase from the current limit of £1,000. According to Laura Suter from AJ Bell, many side hustlers will welcome this change, as it removes the need for additional paperwork for smaller earnings.
However, it is important to note that this change does not reduce the tax they pay. Those earning above £1,000 will still need to pay tax on any additional income. The government has announced a simple online service where people can pay any tax owed.
Impact on Small Business Owners and Side Hustlers
The new rules will affect people earning income from various activities such as trading vintage clothes, dog walking, gardening, or even driving for a taxi service. Additionally, social media influencers will also benefit from this change.
Under UK tax law, everyone has a trading allowance of £1,000 per year, meaning they can earn up to that amount without paying tax. The government’s new policy will allow side hustlers to earn between £1,000 and £3,000 without needing to submit a self-assessment return.
Instead of filling out a return, individuals earning between £1,000 and £3,000 will be required to pay their tax via a simplified bill, possibly through their PAYE tax code.
Timing of the Changes
While the government has made these announcements, the changes are expected to take effect within this parliament. This means side hustlers may need to wait until 2029 before the rules come into play.
