Side hustles are booming in the UK. Whether you’re creating handmade items, offering freelance services, delivering meals, or letting out a spare room, more people are discovering new ways to boost their income. To make things easier, HMRC has announced plans to raise the Self Assessment threshold from £1,000 to £3,000. While it’s not in place yet, this change could make tax reporting simpler for thousands of side hustlers across the country.
Understanding the new £3,000 threshold
So, what’s changing?
Currently, if you earn more than £1,000 from self-employment or side income in a year, you must report it to HMRC through Self Assessment. This £1,000 is known as the trading allowance, and it applies to your gross income, not your profit.
Under the proposed change, this threshold will increase to £3,000, meaning you might not need to file a full tax return unless your side hustle earns more than that. The goal is to cut down on administrative burden and make tax reporting easier for small earners.
However, it’s important to note that this change hasn’t been implemented yet and the introductory date hasn’t yet been announced, although it is likely to be before 2029. Until then, the current £1,000 threshold still applies.
Who does this impact?
This change will affect many people who earn extra income alongside their main job or other commitments. These include:
- Online sellers on platforms like eBay, Vinted, Etsy, or Facebook Marketplace.
- Freelancers, such as writers, designers, photographers, and consultants.
- Gig economy workers delivering for Uber, Deliveroo, or running errands on TaskRabbit.
- Short-term landlords include Airbnb hosts or those renting a room in their home.
It’s crucial to remember that the £3,000 threshold refers to gross income before expenses.
According to Treasury estimates:
- Around 300,000 people are expected to benefit from this.
- Of those, approximately 90,000 will owe no tax at all under the new rules.
What if you earn under £1,000?
No change here. If your total trading income is under £1,000, you:
- Don’t need to register for Self Assessment.
- Don’t need to file a tax return.
- Don’t need to pay any tax on it.
This small buffer is designed to support very low-income or occasional earners.
What if you earn between £1,000 and £3,000?
Once the new rules are in place, things will get much easier for side hustlers.
If your income falls between £1,000 and £3,000, you may not need to file a full Self Assessment tax return. HMRC plans to introduce a more basic online platform for reporting income and paying any tax due. There are no details about what this will look like so we will have to wait and see if it meets the ‘basic’ criteria.
However, you’ll still need to:
- Track all earnings from your side hustle.
- Declare your income using HMRC’s online tool.
- Pay any tax due, depending on your overall income and tax code.
What if you earn over £3,000?
If your side hustle income exceeds £3,000 in gross earnings, you will still need to:
- Register for Self Assessment by 5 October, following the end of the tax year.
- Keep records of all income and expenses.
- File your tax return by 31 January.
- Pay income tax, and possibly National Insurance by 31 January.
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What if I'm unsure whether I need to file?
When in doubt, use HMRC’s eligibility tools on their website. If you’re close to the £1,000 threshold, it might still be worth voluntarily reporting your income to stay on the safe side. A short chat with an accountant can help prevent future fines and clear up confusion.
Starting an online business or side hustle: What you need to know
If you’re regularly buying and selling online to make a profit, HMRC sees you as self-employed. That means you’re running a business and need to play by the tax rules.
Once your income (before expenses) goes over £1,000 in a tax year, you must:
- Register as self-employed with HMRC by 5 October following the tax year you started.
- File a Self Assessment tax return by 31 January.
- Pay tax on your profit (what’s left after deducting business expenses) and National Insurance.
How much tax will I pay on side hustle income?
The £1,000 trading allowance is a tax-free buffer that’s already available to anyone earning from self-employment or side income. It means you can earn up to £1,000 in gross income from a side hustle in a tax year without needing to register for Self Assessment, file a tax return, or pay any tax.
This allowance isn’t changing. It will continue to apply even if the proposed £3,000 Self Assessment threshold comes into effect. The key difference is that while the trading allowance exempts very low earners from filing entirely, the upcoming £3,000 threshold would extend that exemption to more people, reducing the admin burden on those with modest extra income.
So, if your side hustle earns under £1,000 in a tax year, you don’t need to worry about HMRC at all. If your earnings fall between £1,000 and £3,000 once the new rule is introduced, you may still avoid a full tax return, but you’ll likely need to declare the income via a simplified online system. Until the change takes effect, the £1,000 trading allowance remains the key benchmark for whether you need to report side income.
Tips for managing side hustle income
- Use a separate bank account for clarity:
This makes it easier to track your side hustle money without mixing it up with personal finances. It’s also helpful if HMRC ever asks for proof.
- Log every transaction—income and expenses:
Write down every bit of money you earn or spend for your side hustle. Use a notebook, spreadsheet, or app—whatever works for you. Keeping track will save you a headache at tax time.
- Set aside 20–30% of earnings for potential tax bills:
Not all your earnings are yours to keep. It’s smart to save a portion in a separate pot for when your tax bill comes due.
- Use accounting software to stay organised:
Tools like QuickBooks, FreeAgent, or even Excel can help you stay on top of your finances. They also make filing your tax return (or using the upcoming simplified tool) much easier.
- Consult a tax advisor if income becomes regular or substantial:
If your side hustle starts bringing in consistent income, getting professional advice can help you claim the right expenses, stay compliant, and possibly save money.
Conclusion
The proposed threshold rise to £3,000 will come as a welcome relief for many UK side hustlers. Though it hasn’t been implemented yet, it reflects a growing recognition of the shift in how we work and earn. In the meantime, staying compliant with existing rules, keeping records, and being prepared will save you time and stress. Whether you’re selling crafts, offering services, or renting a spare room, these changes are designed to make your hustle work for you.
Got questions about how these changes affect your side hustle? Contact us today for expert guidance.
