People earning extra money from side jobs will be able to earn up to £3,000 a year without paying tax from April, under a change announced in the Autumn Budget. The new threshold is three times the current £1,000 limit and is expected to affect around 400,000 people earning money through activities such as selling items online, dog walking and pet sitting.
Tax-free Side Hustle Allowance to Rise to £3,000
At present, people generally need to declare income from trading activities when their gross trading income exceeds £1,000 in a tax year. The new rules will raise that threshold to £3,000 from April.
The Government says the change could reduce the average tax bill by around £380 for those affected. Prime Minister Andy Burnham said the change was intended to allow people who work additional hours to keep more of their earnings.
Vinted Sellers and Other Side Hustlers Could Benefit
The change could affect a wide range of people earning additional income outside their main employment. Examples include: Vinted sellers, Dog walkers, Pet sitters, People carrying out occasional paid jobs and other small-scale traders.
The new threshold applies to earnings from side activities rather than an individual’s total income from employment and other sources.
You May Still Need to Tell HMRC about Your Income
The higher threshold does not mean that all side hustle income is automatically free from tax in every circumstance. People whose trading income exceeds the relevant threshold may still need to register for Self Assessment and submit a tax return.
HMRC rules also distinguish between selling unwanted personal possessions and carrying out a trading activity for profit. Anyone unsure whether their activities count as trading should check the latest HMRC guidance.
Penalties Can Apply if You Fail to Notify HMRC
People who are required to complete a tax return must tell HMRC within the applicable deadlines. For those who need to register for Self Assessment for the first time, the deadline to notify HMRC is generally October 5 following the end of the relevant tax year.
Tax owed through Self Assessment is normally due by January 31 following the end of the tax year. Failing to notify HMRC when required can result in penalties. The amount depends on factors such as whether the failure was deliberate and whether HMRC had already contacted the taxpayer.
What the Change Means for Side Hustlers
The increase from £1,000 to £3,000 gives people earning modest amounts from side activities more room before the trading allowance threshold is reached. The Government expects around 400,000 side hustlers to benefit, with an estimated average tax saving of £380.
For anyone earning more than the new threshold, the existing tax and reporting rules will continue to apply to the relevant income.
