Written by Business Advisory Services
Ward Goodman
April 17, 2025
The UK government has announced an important change to the Income Tax Self-Assessment (ITSA) reporting threshold, which could benefit around 300,000 people. The move aims to simplify tax obligations and will mainly benefit individuals with low levels of extra income, including those with freelance work, online sales, or occasional income from hobbies or casual side hustles.
What Is the Current Threshold and How Does It Work?
Those who currently earn more than £1,000 each year in gross income from self-employment or trading activities are required to file a Self-Assessment tax return with the UK tax authorities HMRC. This includes a wide range of activities, including freelance work, online selling, and casual services such as dog walking or tutoring. The £1,000 threshold which refers to gross income, is commonly known as the “trading allowance,” and provides a tax free exemption up to this amount. Anyone who earns over £1,000 must report their income to HMRC and as a result, may be subject to taxation.
Upcoming Changes to the Threshold
The UK government recently announced plans to increase the ITSA reporting threshold from £1,000 to £3,000 within the current parliamentary term, which extends until 2029. This change means that anyone earning up to £3,000 annually in gross income from trading income or side activities will no longer be required to file a Self-Assessment tax return.
It’s important to note that while the requirement to file a tax return will be lifted for incomes between £1,000 and £3,000, tax may still be due on earnings over £1,000. The government intends to introduce a new online service to facilitate the reporting and payment of any tax owed within this income bracket.
When Will the Changes Come into Force?
Although the exact implementation date has not been confirmed, the government has committed to implementing this change within the current parliamentary session, concluding by 2029. Taxpayers should continue to adhere to existing reporting requirements until the new threshold has been put in place.
Who Will Be Affected?
The announcement will no doubt be warmly received by around 300,000 taxpayers believed to be currently undertaking small-scale trading activities and side hustles. HMRC estimates that 98% of these individuals are self-employed – many of whom do not have full-time employment, but instead rely on modest earnings from casual work, online sales, or freelance services.
Final Thoughts
The proposed increase in the Self-Assessment reporting threshold represents a much simpler way to handle tax responsibilities for many small traders and side hustlers. By reducing administrative burdens, the change looks to promote entrepreneurial activities while making it easier for the self-employed to keep on top of their tax administration.
At Ward Goodman, we are committed to keeping our clients informed about such developments and providing guidance suited to your specific circumstances. If you have questions about how this change may impact your tax obligations or require assistance with tax planning, please do not hesitate to contact our team of experts.
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