- Tax minister James Murray is set to announce an increase in the trading income threshold in a speech later today, from £1,000 to £3,000 by 2029
- Move is intended to modernise the tax system, helping up to 300,000 taxpayers and alleviating pressure on creaking HMRC customer services
- HMRC has experienced a surge in customer service enquires in recent years, with the number of calls answered halving in the past decade
Laura Suter, director of personal finance at AJ Bell, comments:
“Anyone who earns money from a second job or has a side hustle will be pleased to hear the amount they can earn before having to file a tax return will triple in the coming years. The government has announced that people will be able to earn £3,000 a year from trading income before they have to file a self-assessment tax return, up from the current £1,000.
“The change doesn’t mean those traders will pay less tax, just that they won’t have to file a self-assessment tax return for that income until they hit £3,000. Those who are below this threshold, and don’t need to file a tax return for any other reason, will be able to use an online system to pay any tax they owe rather than going through the rigmarole of the self-assessment system.
“This move will benefit those who have a job and pay their tax through PAYE and have no other reason to file a tax return, but earn some money from a side hustle. It will also help those whose only income source is a small amount of trading income which they don’t need to pay tax on. The government says up to 300,000 taxpayers will be saved from filing a tax return as a result of the change.
“There was a panic a couple of years ago that anyone selling their old clothes or football sticker albums on Vinted or eBay would be hit with a tax bill, after it was reported that these online selling platforms were speaking directly to HMRC about people’s earnings. But the reality is that these people don’t need to worry about paying tax on their money. The trading allowance is for people operating as a business and trading, rather than people offloading unwanted items from the attic. The allowance includes people babysitting, dog walking, running an Etsy shop or being a social media influencer.
“With HMRC overwhelmed by the number of people calling their helplines and filing tax returns, any move that alleviates this pressure has to be welcomed. Changes to the tax system in recent years mean millions more people have been dragged into paying tax, many of them needing help and support from HMRC. But the taxman is finding it all very taxing, and has struggled to meet this surging demand.
“The government itself says that 90,000 of those filing a self-assessment tax return for this income have no tax to pay, meaning they are needlessly filling out paperwork that HMRC is collecting no tax for. Solving these absurd quirks in the tax system should be applauded. However, the timelines on bringing in this measure are spectacularly vague, with the government only promising to bring it in by 2029.”
