The Government has announced plans to increase the threshold for reporting self-employment income via self assessment from £1,000 to £3,000 per year.
What This Change Means
This significant change will affect around 300,000 taxpayers who currently have to complete self assessment returns for relatively small amounts of side-hustle income. The new system promises to reduce administrative burden while maintaining tax compliance through a simpler reporting process.
This article covers everything you need to know about these important changes and how they might affect your side-hustle income:
- Understanding The Current £1,000 Threshold
- The New £3,000 Threshold Timeline
- How The Alternative Reporting System Will Work
- What You Need To Do Right Now
Understanding The Current £1,000 Threshold
Currently, if you earn over £1,000 from self-employment or side-hustle activities such as babysitting, dog walking, tutoring, or selling items online, you must report this income to HMRC by filing a self assessment tax return. This applies even if you don’t owe any tax on these earnings.
This requirement has created significant administrative burden for taxpayers with small amounts of additional income, forcing them into the self assessment system purely for reporting purposes.
The New £3,000 Threshold Timeline
The Government intends to increase the reporting threshold to £3,000 per year by the end of the current Parliament, which means no later than April 2029. This change will save time and reduce paperwork for approximately 300,000 taxpayers across the UK.
However, it’s important to note that this is currently just a plan – no specific implementation date has been announced yet.
How The Alternative Reporting System Will Work
The threshold increase comes with an important caveat: this is only a change to reporting requirements, not tax obligations. Here’s what you need to know:
- You’ll still need to inform HMRC about income between £1,000 and £3,000
- Tax will still be due on this income if it exceeds your personal allowances
- Instead of self assessment, you’ll use a new, simpler online service
- The threshold is based on gross income before any business expenses are deducted
The Government has promised that this alternative online service will be much simpler than completing a full self assessment return.
What You Need To Do Right Now
Until an official implementation date is announced, the current rules remain in place:
- Continue reporting income above £1,000 via self assessment
- Keep detailed records of all your side-hustle income and expenses
- Don’t assume the new threshold applies to your current tax obligations
- Seek professional advice if you’re unsure about your reporting requirements
Support From Digital Tax Matters
These changes represent a welcome simplification for many people earning modest amounts from side-hustle activities, but understanding when and how to report this income correctly requires careful consideration of your specific circumstances. The transition period and new reporting system will also need careful navigation to ensure compliance.
Our expert accountants at Digital Tax Matters can help you understand how these changes will affect your side-hustle income, ensure you’re meeting your current reporting obligations, and prepare for the new system when it’s implemented. Get in touch for support today.