Side hustle tax threshold to rise to £3,000

If you’re a regular reader of this blog, you’ll know about the side hustle tax 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 other words, 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, and probably a tax bill.

If you are in this position, you’ll be glad to know that the side hustle tax 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 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 threshold will be £3,000. You’ll be able to earn anything up to that amount from one or more gigs (combined) without having to fill in a tax return.

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. 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 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.

Any other changes?

Sky News also reports a related change to the tax system. It says that there’ll be a new online form for people to ‘declare cash earnings up to £3,000 for self-employed work’. This will mean that people earning less than that amount won’t have to fill in a full Self-Assessment Tax Return.

Summary

The new side hustle tax thresholds make a lot of sense. It doesn’t seem sensible for HMRC to have to deal with thousands of 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.

The big problem at the moment is that we don’t know exactly when the side hustle tax 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.