The UK government has announced plans to increase the tax reporting threshold for side incomes from £1,000 to £3,000 by the end of 2029. This change is expected to remove up to 300,000 people from self-assessment tax returns, simplifying tax obligations for individuals earning from small-scale trading, freelancing, and online selling1.
Under current rules, individuals earning less than £1,000 per tax year through side activities do not need to declare this income due to the Trading Allowance. However, exceeding this threshold by even £1 requires a full self-assessment tax return. The new system would still require tax to be paid on income over £1,000, but those earning between £1,000 and £3,000 would no longer need to file a tax return. Instead, they could settle their tax through a simple online payment system or via PAYE deductions.
Stricter Oversight of Online Sellers
Since January 2024, HMRC has introduced new regulations for online marketplaces, requiring platforms such as eBay, Vinted, and Etsy to automatically report seller earnings. This change is intended to improve tax compliance by making it easier for HMRC to track undeclared income from digital sales2.
As part of its enforcement strategy, HMRC has already begun sending ‘nudge letters’ to individuals suspected of failing to declare earnings from online trading. With direct access to data from digital platforms, HMRC is now able to identify and contact sellers who may owe tax3.
US-Style Whistleblower Rewards Under Consideration
The government is also exploring a new whistleblower reward scheme to encourage individuals to report tax fraud. This would offer higher financial incentives to informants, bringing the UK system closer to that of the US Internal Revenue Service (IRS), which has successfully used similar schemes to recover unpaid taxes4.
The aim is to target large-scale tax evasion, moving beyond low-level reports from neighbours or former employees. To support this, HMRC is expected to introduce stronger legal protections for whistleblowers, ensuring their safety and confidentiality.
If these proposals are implemented, they could streamline tax reporting for small-scale earners, while giving HMRC greater powers to monitor online sales and tackle tax evasion. However, further details on the practical application of these measures and their impact on taxpayers are still to be confirmed.
Sources
1.GOV.UK (2025). Boost for side-hustlers as 300,000 people to be taken out of tax returns, government announces. Available at: https://www.gov.uk/government/news/boost-for-side-hustlers-as-300000-people-to-be-taken-out-of-tax-returns-government-announces [Accessed 14 Mar. 2025].
2.The Guardian (2025). New UK tax rules on side hustles like eBay and Vinted may lead to ‘nasty surprises’. Available at: https://www.theguardian.com/politics/2025/jan/11/new-uk-tax-rules-on-side-hustles-like-ebay-and-vinted-may-lead-to-nasty-surprises [Accessed 14 Mar. 2025].
3. This is Money (2025). Tax expert warns sellers who use online marketplaces not to ignore new wave of HMRC nudge letters Available at: https://www.thisismoney.co.uk/money/smallbusiness/article-14439195/Tax-expert-warns-sellers-use-online-marketplaces-not-ignore-new-wave-HMRC-nudge-letters.html [Accessed 14 Mar. 2025].
4. LBC (2025). Government announces cash reward scheme for whistleblowers who expose tax avoidance and fraud. Available at: https://www.lbc.co.uk/news/money/government-cash-whistleblowers-expose-tax-avoidance-fraud/ [Accessed 14 Mar. 2025].
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