Here’s a quick summary of HMRC’s planned changes to the reporting threshold for trading income, as announced by the tax minister:
What’s changing?
The reporting threshold for trading income will increase from £1,000 to £3,000 during this Parliament. This means you’ll only need to report trading income if you earn more than £3,000. If you earn between £1,001 and £3,000, new rules and a simplified online reporting service will apply (rather than the full self-assessment tax return).
Important: The statutory trading income allowance remains unchanged at £1,000 per year. This is the amount of trading income you can earn before any tax or reporting is due.
How does it affect you?
If your total trading income is £1,000 or less: No change. You remain exempt from reporting or paying tax on this income.
If your trading income is between £1,001 and £3,000: You will not need to do a full self-assessment. Instead, HMRC will introduce a new online service for simpler reporting. While the allowance is unchanged, you may still have a small tax liability on income above £1,000.
If your trading income is over £3,000: You are still required to complete a self-assessment tax return as usual and pay tax on income over £1,000.
Key Features:
The increase only changes who needs to report (not how much is tax-free).
A brand new, simpler online service will handle reporting for those under the new £3,000 limit, with further guidance due soon.
No implementation date has been set yet, but these changes are planned for the current Parliamentary term.
If you need any tax advice in Milton Keynes give a call to the team at Holmes Accountancy on 01908 315716 or contact us here.
The tax tip is provided for general guidance only; further advice should be sought, for specific issues.
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