The UK government has announced a significant change to the trading allowance, marking a substantial shift in tax regulations for individuals with side hustles. Under the new arrangement, individuals will soon be able to earn up to £3,000 annually from "trading income" before they are required to file a tax return. This adjustment triples the current threshold, which allows for only £1,000 in earnings without necessitating a self-assessment return. The measure is set to affect up to 300,000 people, providing relief from the administrative burden of tax filing.
The trading allowance remains unaffected by this announcement, meaning individuals can still earn up to £1,000 tax-free. However, those earning between £1,000 and £3,000 will need to pay taxes owed through a simplified tax bill. This change aims to facilitate easier tax management while encouraging entrepreneurial activities among Britons.
Laura Suter of the investment platform AJ Bell noted that many individuals would be pleased with this change. The government's objective is to "make it easier for Britons to make the very most of their entrepreneurial spirit." The new policy also seeks to alleviate operational pressure on HM Revenue & Customs, which has faced criticism for its customer service standards.
Though individuals falling within the new £1,000 to £3,000 earning bracket will still need to pay taxes on their income, they will benefit from not having to file a self-assessment return until their earnings surpass £3,000. The government has also indicated plans for a new simple online service that will streamline the tax payment process.
Accountancy firm BDO highlighted that while the change may not reduce the overall tax burden, it simplifies compliance by eliminating the need for a detailed tax return for earnings within the specified range. This policy adjustment demonstrates an effort to support small-scale entrepreneurs and mitigate administrative complexities.