No More Tax Returns? HMRC’s Big Change Could Affect 300,000 People!

No More Tax Returns? In a major shift aimed at simplifying tax obligations, HM Revenue & Customs (HMRC) has announced an increase in the Income Tax Self Assessment (ITSA) reporting threshold for trading income from £1,000 to £3,000. This change means that around 300,000 individuals who earn money through side hustles, freelancing, and small-scale trading will no longer need to file a self-assessment tax return. This move is part of a broader effort to modernize the tax system and reduce unnecessary paperwork for small earners. But what does it mean for you? Let’s break it down.

No More Tax Returns?

HMRC’s decision to raise the Self Assessment reporting threshold to £3,000 is a game-changer for side hustlers and small business owners. By removing unnecessary tax return obligations, this move simplifies financial reporting and encourages entrepreneurship. However, it’s still important to stay informed, keep records, and understand your tax responsibilities to avoid future issues.

Understanding the Change

The Self Assessment tax return system requires individuals to report their income and capital gains annually. Until now, anyone earning over £1,000 from self-employment, freelancing, or side businesses had to file a tax return.

With the new £3,000 threshold, individuals making less than this amount from non-salaried income will no longer need to submit a return—though they may still owe tax on their earnings.

Example: If you make £2,500 a year selling handmade jewelry on Etsy, you won’t need to file a Self Assessment tax return. However, if you earn £3,500, you will still need to file.

Who Will Benefit from This Change?

This adjustment is great news for side hustlers and small-scale traders. Some key groups that stand to gain include:

• Freelancers & Contractors – Writers, designers, developers, and consultants working on small projects.
• Gig Economy Workers – Uber drivers, food delivery couriers, or dog walkers with limited annual earnings.
• Online Sellers – People selling on eBay, Vinted, Depop, or Etsy in small volumes.
• Hobby Entrepreneurs – Those making extra money from crafts, baking, or handmade products.
• Part-Time Tutors & Trainers – Individuals offering music lessons, personal training, or tutoring on a small scale.

According to HMRC, 90,000 of those affected will no longer need to report their income at all, while others will be able to settle tax liabilities through a new simplified online system.

Why is HMRC Making This Change?

The government’s goal is to reduce unnecessary tax return filings and streamline HMRC’s operations. Key motivations include:

• Reducing Administrative Burden – Processing tax returns for people with small earnings consumes time and resources.
• Encouraging Entrepreneurship – Lower tax hurdles can encourage more people to start small businesses.
• Improving Efficiency – By cutting down on unnecessary tax returns, HMRC can focus on larger compliance risks.

This also aligns with HMRC’s broader push toward digital transformation, making tax reporting easier and more accessible.

What You Need to Do Next If There Are No More Tax Returns? (Step-by-Step Guide)

If your trading income is below £3,000, you may not need to file a tax return, but it’s still important to follow these steps:

1. Check Your Earnings

• Add up all self-employment income from side jobs, online sales, or freelance work.
• If you’re under £3,000, you likely don’t need to file a Self Assessment return.
• If you’re above, you must file as usual.

2. Keep Records

Even if you’re below the threshold, HMRC recommends keeping records of:

• Invoices & sales receipts
• Bank statements
• Business-related expenses

3. Understand Your Tax Liabilities

• If your total income (including salary) exceeds personal allowance (£12,570 for 2024/25), you may still need to pay tax on self-employed earnings.
• HMRC is introducing an online tool to simplify small earnings tax payments.

4. Know Your Deadlines

• The usual Self Assessment deadline is 31st January for online filings.
• Keep track of tax rule updates on gov.uk.

Common Mistakes to Avoid

Many taxpayers make errors when dealing with small earnings. Here are some things to watch out for:

1. Assuming No Tax Is Owed – Not filing a tax return doesn’t mean your earnings aren’t taxable.
2. Ignoring Business Expenses – Even small traders can deduct expenses like materials and website costs.
3. Mixing Personal & Business Finances – Keep separate records to avoid confusion.
4. Forgetting About Other Income – If you have multiple income streams, tax liabilities can add up.

How This Compares to Other Countries?

Many nations have similar small business tax exemptions:

• USA: The IRS allows small hobby income exemptions but requires reporting over $400.
• Germany: Freelancers earning under €22,000 benefit from tax simplifications.
• Australia: The ATO’s “Hobby vs. Business” model provides similar low-income exemptions.

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Frequently Asked Questions (FAQs)

1. When will this change take effect?

The government plans to implement the £3,000 threshold within this parliamentary term (by 2029).

2. If my income is below £3,000, do I still pay tax?

Yes, if your total annual earnings exceed £12,570, you may still owe tax. However, HMRC is developing a simplified reporting system.

3. What happens if I exceed the £3,000 threshold?

If you earn more than £3,000 in self-employed income, you must continue filing a Self Assessment tax return.

4. How do I track my small business income?

Use apps like QuickBooks, FreeAgent, or a simple spreadsheet to log income and expenses.

5. Where can I find official information?

Check gov.uk for HMRC’s latest updates.