Martin Lewis’ Money Saving Expert (MSE) team have issued a warning to people who have a side hustle ahead of some huge changes. The MSE team shared that the government was planning to change the rules around side hustles, and although the changes are not set to be introduced for a few years – those with a side hustle needed to be aware of them.
Under the plans, people will be able to earn up to £3,000 without having to submit a self-assessment tax return. Martin’s team reiterated that the changes won’t affect how much you can make before you start owing tax or how much tax you’ll pay.
They only mean that you can earn more without having to submit a self-assessment tax return and declare your earnings to HMRC. According to the Government, the change will impact around 300,000 people. It is currently not yet clear when this will happen – all we know is that it should be “within this parliament”, which could be as late as 2029.
Under current UK rules, you can earn £1,000 in additional income each tax year alongside your regular job – this is known as your Trading Allowance.
If you make more than this, then you will need to register yourself as self-employed and you will need to start submitting self assessment tax returns.Side hustles are a term coined over the last few years to describe a second job or form of income you have alongside your full-time one.
This can include making and selling goods such as candles, clothes, pottery, etc, dog walking or gardening on the side, driving a taxi, or creating online content. The trading allowance covers all of these, so if you have multiple side hustles, it covers what you make collectively and not from each one.
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In the future, you will be able to earn more before having to register yourself as self-employed. The MSE explained that if you earn under £1,000 each tax year, then you will not need to declare this – nor do you have to pay tax on it. These are the rules now and will not be changing in the future.
Martin’s MSE team added: “What counts is your total income before taking off any platform fees or other expenses – NOT what you end up with in your bank account. So double check, especially if you’re close to the limit.”
When the changes are introduced, if you make between £1,000 and £3,000 in the tax year, you won’t need to file for self-assessment, but you’ll still need to tell HMRC and pay tax.
The government says you’ll be able to do this – so report your earnings and pay tax – using a “new online service”.However, it has not been made clear how this will work, or when it will be launched.
If you make more than £3,000 a year, then you will need to file a self-assessment tax return to HMRC. The MSE team said the rules will also apply to those who are renting out property.
The property allowance currently lets you earn up to £1,000 renting out your whole home or another property without needing to declare that income. If you’re renting out a single room in your house, this goes up to £7,500 under the Rent a Room scheme, which isn’t changing for now.
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