Article by GoSimpleTax

A government proposal to increase the Self Assessment tax return threshold for traders from £1,000 to £3,000 before the end of this parliament (2029) would mean 300,000 people (98% of them self-employed) no longer having to file a tax return.

An estimated 90,000 would also have no tax to pay and many side-hustlers will be among them. It’s great news for those who operate a side hustle, whether selling on Vinted or eBay, running a dropshipping business, selling handmade items, Uber driving, dog walking, teaching or other part-time business.

Side hustle growth

Currently, if your annual gross trading income (ie total amount you earned by trading without deducting any expenses) is more than £1,000, you must register for Self Assessment (if you’re not already registered) and file a Self Assessment tax return each year. But this could end for almost a third of a million people.

The government says it wants to make the change to free up time for taxpayers, so they can get on with running and growing their business, as it seeks to “transform HMRC into a quicker, fairer and more modern body”. However, that doesn’t mean that they won’t have to pay any tax. About 210,000 would, but they would do so via a new simple online service, although no details have yet been revealed.

According to James Murray, Ealing North MP and Exchequer Secretary to the Treasury: “We are changing the way HMRC works, to make it easier for Brits to make the very most of their entrepreneurial spirit. Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side hustle.”

Reality check

So, although the proposal is to increase the tax reporting threshold to £3,000, the £1,000 tax-free trading allowance won’t change. That means:

• If your gross annual trading income is below £1,000 – no tax is payable and you don’t need to report it to HMRC. You also get your Personal Allowance (currently £12,570 for the 2025/26 tax year), so you only pay Income Tax on gross income of £13,570. This won’t change.
• If your gross annual trading income is £1,000-£3,000, once the changes are introduced, Income Tax may still be payable, but you can report your income using the new simplified online service, without having to complete a tax return.
• If your gross annual trading income is more than £3,000, following the planned changes, you’ll still have to register for Self Assessment, complete a tax return and pay any taxes due.

Need to know! Current reporting rules remain the same and will only change if the proposals are introduced.

Welcome change?

Eve Williams, CEO of eBay UK, reacted favourably to the proposed change to the Self Assessment tax return threshold, saying: “This will be welcome news for thousands of UK sellers for whom eBay is a side hustle and a means of supplementing their household income during challenging times. By removing the paperwork associated with selling online, hopefully, we will help these side hustles grow into fully fledged small businesses.”

Reaction was rather more lukewarm from self-employment association IPSE. It said: “If the new service allows simple incomes to be reported in a few clicks, this will undoubtedly make the process of reporting easier for the estimated 210,000 that are expected to be eligible. But decoupling the thresholds for reporting and paying tax on small incomes has the potential to create confusion. Moreover, it’s a missed opportunity to lift both thresholds together, as organisations like IPSE have campaigned for, which would give side-hustlers an even bigger boost.”

Improving customer service

The government is also looking into ways to improve HMRC’s customer service. Murray and senior HMRC officials have had meetings with NatWest, Octopus Energy, Barclays, John Lewis, Centrica and other large firms to “learn best practice and innovative approaches to modernising and digitising customer service”. Use of generative AI and test and learn approaches to improving customer service are part of this. Reportedly, HMRC is also trialling the use of AI to point taxpayers to tax information they need on government website GOV.UK.

HMRC has also started to trial a new system that enables taxpayers to use their voice as their password, allowing them to “pass security checks faster and more securely”. The system could soon be rolled out if the trial proves successful, says the government.

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