300,000 Expected to Benefit from Higher Self-Assessment Reporting Threshold
The UK Tax Minister, James Murray, has recently confirmed plans to raise the Income Tax Self-Assessment (ITSA) trading income reporting threshold from £1,000 to £3,000 within this parliament.
Efficiency reforms are at the centre of the government’s Plan for Change and this announcement is one of several upcoming changes that serve to underscore an intent to streamline processes and drive economic growth.
Trading income reporting threshold
By increasing the ITSA trading income reporting threshold, the intention is to remove some of the administrative burden and worry for those that receive income from self-employment, specifically ‘side hustles’ – including such things as selling clothes online, dog-walking, gardening on the side, driving a taxi, or creating content online.
The trading income reporting threshold differs from the trading allowance, which is understood will remain at £1,000.
- Trading income reporting threshold: one of the factors used to determine if you need to file a tax return; and
- Trading allowance: a tax exemption of up to £1,000 a year for individuals with trading income.
Those that still have tax to pay, despite being below the trading income reporting threshold, will be able to settle what they owe through a new simple online service. For example, if someone is already a taxpayer, they have limited trading expenses (less than £1,000, so opting for the trading allowance) and their trading income is between £1,000 and £3,000.
Benefit to 300,000 taxpayers
With the upcoming increase in the reporting threshold, an estimated 300,000 taxpayers will no longer need to file an ITSA return. Among them, around 90,000 will not have any tax to pay and will no longer need to report their trading income to HM Revenue & Customs (HMRC).
Other measures to deliver Plan for Change
Additional announcements include:
Voice biometrics
Introducing a new system that enables taxpayers calling HMRC to use their voice as a password. HMRC states that “voice biometrics strengthen security, safeguard customer data, and reduce call times.” It is expected that this will be rolled out across HMRC over the rest of this year.
Tackling phoenixism
Ramping up efforts to combat “phoenixism,” a practice where the same business is carried on successively through a series of companies that go insolvent, avoiding debt repayment. Addressing this issue will mean collaboration between HMRC and the Insolvency Service to
expand the use of securities, requiring new companies to make upfront tax payments and making rogue directors personally liable for the taxes of their company.
Reward program for informants
Launching a new reward program to motivate informants to report tax fraud to HMRC. The focus will be on tackling serious non-compliance among large corporations, wealthy individuals, offshore and avoidance schemes.
Research and development tax relief
In Spring 2025, there will be a consultation on various measures, including expanding the use of advance clearances for research and development tax relief and for investors in significant projects.
How M+A Partners can help
M+A Partners’ tax experts provide specialist advice to guide you through the complexities of tax – helping you to plan ahead and remain compliant.
If you would like further guidance on making sure your tax affairs are in order, get in touch using the details below.
