New side hustle tax reporting rules

Good news for those with a side hustle; the UK government has announced significant changes to the tax reporting requirements. The aim is to simplify the reporting process for taxpayers, while ensuring appropriate tax collection continues.

Here’s a comprehensive breakdown of what these changes mean for the millions of UK residents who have a profitable side hustle.

Note that the changes won’t be effective immediately however, they will come into operation in 2029 before the end of this current parliament.

Reporting thresholds

The threshold for needing to file a self-assessment tax return for trading income will increase from £1,000 to £3,000. This will simplify tax reporting for the hundreds of thousands of taxpayers with secondary incomes.

Key changes

The significant change to self-assessment being introduced is a distinction between the tax reporting and tax liability thresholds.

• Tax-free trading allowance – remains unchanged at £1,000
• Self-assessment reporting threshold – will increase to £3,000.

This distinction creates three separate categories for side hustle earners:

• Earnings under £1,000: No tax liability and no reporting requirement;

• Earnings between £1,000 and £3,000: Tax liability exists, but reporting will be via a new and simplified online system rather than a self-assessment tax return;

• Earnings over £3,000: Full self-assessment is required, along with tax payment.

Online reporting platform

For taxpayers in category 2 and with earning between £1,000 and £3,000 from their side hustle, HMRC plans to introduce a streamlined online platform. This new service will allow taxpayers to declare their income and pay any tax due from their sidelines without the complexity of completing a full self-assessment tax return.

It’s important to remember that these changes won’t take immediate effect. The government has indicated that the new threshold and reporting system will be implemented “within this parliament” – meaning by the end of 2029 at the latest. Until then, the current £1,000 threshold remains in place for both the tax-free allowance and reporting requirements.

Regardless of when these changes come into operation and irrespective size, all taxpayers with a side hustle should always keep detailed records of their income and expenses. HMRC may ask to see details of your trading records at any time, and it is always best to be prepared and have this information easily available.

If you would like help with your business accounts, please contact us to discuss your requirements.

partners@rjp.co.uk