Significant Tax Update for Side Hustles Impacting Sellers, Taxi Drivers, and Dog Walkers
In a significant tax reform aimed at supporting small business owners and freelancers, the UK government has announced plans that will relieve approximately 300,000 individuals—including Vinted sellers, taxi drivers, and dog walkers—from the burden of filing tax returns. This initiative, introduced under the guidance of Sir Keir Starmer, aims to foster economic growth by adjusting the Income Tax Self Assessment (ITSA) reporting threshold for trading income.
Previously set at £1,000, this threshold will now be raised to £3,000, allowing many people to avoid the lengthy and often complicated process of tax reporting. It’s estimated that among these 300,000 individuals, around 90,000 have income levels so low that they owe nothing in taxes, further eliminating the need for reporting. For those who do have tax obligations, a streamlined “simple online service” will be available for payment, making the process more efficient and less cumbersome.
These changes come at a time when side hustles—additional income-generating activities that became increasingly popular during the pandemic—are becoming a vital part of many people’s financial lives. While this reform will simplify tax reporting and give individuals more time to focus on growing their side businesses, it will not alter the overall tax amounts owed by them.
This initiative has been welcomed by tax minister James Murray, who will outline the changes during a speech celebrating the 20th anniversary of His Majesty’s Revenue and Customs (HMRC), the UK institution responsible for tax collection and management. In his announcement, Murray emphasized the government’s intention to adapt HMRC’s operations to accommodate the evolving landscape of small business and freelance work. He noted, “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.”
Freelancers and entrepreneurs have often voiced concerns over the complexity and time-consuming nature of tax reporting. Reducing the number of individuals required to file tax returns means they can dedicate more time to their businesses instead of administrative tasks. The government acknowledges that improved customer service at HMRC is also necessary, addressing a common grievance among taxpayers who find it difficult to communicate with the tax authority.
The rise in side hustles has been notable, with reports indicating that a significant proportion of the population engaged in these activities during the pandemic. Many took to selling handcrafted items, offering courier services, or even trying their hand at becoming social media influencers. The surge in popularity of resale platforms like eBay and Vinted can partly be attributed to a growing public awareness around sustainability and a backlash against fast fashion.
At the heart of this tax reform lies a commitment to support the entrepreneurial spirit within the UK. By simplifying tax obligations, the government hopes to incentivize more people to explore various income-generating avenues, ultimately fostering a more dynamic and robust economy. Such measures are designed to create an environment where creativity and commerce can flourish without the shackles of excessive bureaucracy.
