HMRC has confirmed that around 300,000 taxpayers will be taken out of the Self-Assessment tax return system under changes announced by the Labour government. The move, which raises the Income Tax Self Assessment (ITSA) reporting threshold for trading income from £1,000 to £3,000 gross, was originally outlined by former Prime Minister Sir Keir Starmer and his tax minister James Murray. It will now be implemented under the new Prime Minister Andy Burnham, who succeeded Sir Keir as Labour leader.
Who benefits from the threshold change?
The change is expected to benefit approximately 300,000 taxpayers. Of these, an estimated 90,000 individuals will have no tax to pay and will no longer need to report their trading income to HMRC at all. This applies to people earning from activities such as selling old games, creating social media content, or other side hustles.
No start date has been set for the rule change, but it will take effect before the end of the current parliament, which runs until 2029. This means it will be introduced under Mr Burnham, who has pledged not to call a snap election and will face the next general election as planned in 2029.
Government and industry reaction
James Murray, the Treasury minister responsible for the policy, said: “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. 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. We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people’s pockets.”
Ellen Milner, Director of Public Policy at the Chartered Institute of Taxation, welcomed the announcement: “We welcome the government’s focus on simplifying the tax system and improving customer service – rightly two key priorities for HMRC as the tax authority heads into its third decade. A more straightforward, easy to navigate tax system could free up business owners and managers to focus on growing their businesses, rather than spending their days overcoming bureaucratic hurdles. We especially welcome the announcement of a new approach to dealing with slow-moving income tax queries from agents. Hopefully, in due course, this can be expanded to unrepresented taxpayers and to other taxes.”
Impact on online sellers
Eve Williams, CEO of eBay UK, also commented on the change: “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.”
The policy is part of a broader effort to reform HMRC and reduce the administrative burden on taxpayers. The exact implementation date remains to be confirmed, but the government has committed to delivering the change within the current parliamentary term.
