Side hustle tax return threshold to rise to £3,000

If you’re a regular reader of this blog, you’ll know about the side hustle tax return threshold. Currently, you can earn up to £1,000 from a side hustle each year without needing to submit a Self-Assessment Tax Return. In addition, anything you earn as secondary income up to that amount is automatically tax free.

The problem is that it’s all too easy to earn more than amount. Sell a few extra hand-made items on eBay or start offering extra Yoga sessions and you can soon breach the £1,000 barrier. That means more paperwork for you because you have to fill in a tax return.

If you are in this position, you’ll be glad to know that the side hustle tax return threshold is going to go up.

Why is the side hustle tax threshold changing?

According to the government, there are various reasons for upping the side hustle tax return threshold. The main one is to help transform HMRC into a ‘quicker, fairer and more modern body’. By freeing up time for taxpayers with side hustles, it will help create conditions to support economic growth.

It’s also possible that government has decided to act because side hustles have been very much in the headlines. As recently as February, HMRC launched a campaign to get people to declare earnings from their side gigs. Maybe HMRC has now realised that dealing with lots of tax returns that declare very small incomes isn’t the best use of its resources!

How much is the new threshold?

The new side hustle tax return threshold will be £3,000. However, it’s important to note that you will still only be able to earn up to £1,000 tax free as a side hustle.

If you earn between £1,000 and £3,000, you’ll need to declare it using a yet-to-be-released online platform. This will make the task a lot simpler and quicker than a normal tax return. However, your earnings will be subject to tax.

How many people will the change affect?

The Treasury says that the change will affect in the region of 300,000 taxpayers. Of these, 90,000 will not have to pay tax or report their trading income. The remainder will use the new online platform to report and pay tax on income. Tax Minister James Murray has said that:

“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.”

When will the side hustle tax rules change?

We currently don’t know when the side hustle tax return thresholds will change. Government has said that changes will take effect during the course of this parliament. We will update you when we know more.

Summary

The new side hustle tax return thresholds make a lot of sense. It doesn’t seem sensible for HMRC to have to deal with thousands of complex tax returns from people earning just over £1,000 from side gigs. The higher, £3,000 threshold is also likely to encourage more people to find ways of earning a bit of extra money without having to worry about burdensome paperwork.

The big problem at the moment is that we don’t know exactly when the side hustle tax return threshold will change. It’s a bit vague to say it’ll happen during this parliament. If it gets put back to, say, 2028 then it would certainly be a disappointment for many thousands of people.