The new rules will mean that the threshold for filing a Self Assessment tax return for trading income will rise from £1,000 to £3,000; however, the trading allowance will remain unchanged
HMRC has declared an increase in the threshold for filing a Self Assessment tax return for trading income from £1,000 to £3,000. However, HMRC has confirmed that the trading allowance will remain unchanged.
At present, both the trading allowance and the threshold for reporting Self Assessment income are set at the same level. This effectively means that side hustle incomes below the £1,000 threshold are entirely exempt from tax and reporting obligations.
This implies that for earnings under £1,000, no tax is due and there’s no need to declare it. For earnings between £1,000 – £3,000, some tax may still be applicable on profits, but you can report the income using the ‘simplified online service’ instead of completing a full tax return. In other related news, thousands of Brits to get letter from HMRC after new tax rule comes into force.
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For earnings exceeding £3,000, you must register for Self Assessment, complete a tax return and pay any taxes due on profits. James Murray, Labour Party exchequer secretary to the Treasury, stated: “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,” he added.
Basic-rate taxpayers at 20 per cent could face a £600 bill on income over £3,000, while higher rate taxpayers could be hit with a £1,200 loss and additional rate taxpayers could lose £1,350, reports Birmingham Live.
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Ellen Milner, director of public policy at the Chartered Institute of Taxation, commented: “We welcome the government’s focus on simplifying the tax system and improving customer service – rightly two key priorities for HMRC as the tax authority heads into its third decade.”
“A more straightforward, easy to navigate tax system could free up business owners and managers to focus on growing their businesses, rather than spending their days overcoming bureaucratic hurdles.”
She explained: “We especially welcome the announcement of a new approach to dealing with slow-moving income tax queries from agents. Hopefully, in due course, this can be expanded to unrepresented taxpayers and to other taxes.”
