Boost for side-hustlers as 300,000 people to be taken out of tax returns, government announces

Up to 300,000 people, including those with side hustles, will no longer need to file a Self-Assessment tax return, tax minister James Murray is expected to announce in a speech later today.  

This includes people trading clothes online, dog-walking or gardening on the side, driving a taxi, or creating content online.  

As part of a bold new package to transform HMRC into a quicker, fairer and more modern body the minister is expected to announce plans to increase the Income Tax Self Assessment (ITSA) reporting threshold for trading income, from £1,000 to £3,000 gross within this parliament.  

This will help deliver the Plan for Change by freeing up time for taxpayers helping to create the conditions for economic growth. 

This will benefit around 300,000 taxpayers. An estimated 90,000 of them will have no tax to pay and no reason to report their trading income to HMRC in the future at all. Others will be able to pay any tax they owe through a new simple online service. The changes reflect the government's commitment to driving forward efficiency reform, a key component of its Plan for Change. 

Mr Murray, the minister responsible for HMRC, will announce this reform to tax experts hosted by the Chartered Institute of Taxation and the Institute of Chartered Accountants for England and Wales in a speech to mark the 20th anniversary of HMRC.  

He will also detail future simplifications to the government's Temporary Admission customs procedure, to make this relief for temporary imports easier for a range of sectors to use, including art and antiques, often showcased in exhibitions across the UK.   

A new digital pilot with the United States to test ways to speed up trade processes for U.S. and UK businesses is also expected to be announced. This pilot will look to make the communications between HMRC, the U.S. and businesses more seamless through better use of digital credentials and secure real-time data transfers. It will look to make it easier and quicker for businesses to request trade benefits from each country. 

Minister Murray will also update on the work HMRC is doing to tackle phoenixism – where company directors go insolvent to avoid tax – as well as announcing a new reward scheme to encourage informants to come forward to HMRC about tax fraud.   

Exchequer Secretary to the Treasury James Murray said:  

"From trading old games to creating content on social media, we are changing the way HMRC works to make it easier for Brits to make the very most of their entrepreneurial spirit.   

“Taking hundreds of thousands of people out of filing tax returns means less time filling out forms and more time for them to grow their side-hustle.  

"We are going further and faster to overhaul the way HMRC works to make sure it delivers the Plan for Change that will help put more money in people's pockets." 

Improving HMRC customer services    

Since taking office, Murray has been taking teams of senior HMRC officials to meet firms including NatWest, Octopus Energy, Barclays, John Lewis, and Centrica to learn best practice and innovative approaches to modernising and digiting customer service from the private sector. This includes the use of generative AI and ‘test and learn' approaches to improving customer service. HMRC is trialling the use of generative AI to point taxpayers to the advice they need on GOV.UK. 

In line with practice from banks and other private sector businesses, Murray will announce that HMRC has begun trialling a system where customers can use their voice as their password, to pass security checks faster and more securely. Following an evaluation of the trial, it is expected to be rolled out across HMRC over the rest of this year. Voice Biometrics strengthen security, safeguard customer data, and reduce call times. Customers' voice recordings are converted into encrypted biometric data, a voice print, and stored securely in a data centre. 

As reforms got underway to automate and digitise its services, HMRC met its target of 85 per cent of calls handled between October and December 2024 and is expected to meet its customer service standards in 2025-26.   

As part of this government's commitment to partner and learn from industry, HMRC will launch a new service to provide an escalation route for agents with Self Assessment and PAYE queries which are over 4 weeks old. A dedicated team of experienced technicians and advisers will adopt a ‘once and done' approach, taking end-to-end ownership of cases and maintaining regular communication with agents.    

Closing the Tax Gap – phoenixism and informants    

Since becoming chair of HMRC's board last year, Exchequer Secretary James Murray has steered the UK tax authority to go further and faster to close the tax gap, in order to raise the revenue required to fund public services and investment projects.    

Following the Autumn Budget's announcement of future work to tackle phoenixism – where rogue directors avoid payment of company tax by going insolvent – Mr Murray will update on the work in his speech. He will lay out how HMRC and the Insolvency Service have agreed a joint plan, which includes an increase to the use of securities, where HMRC asks for upfront payment of tax from new companies, making more rogue directors personally liable for the taxes of their company.   

Murray will also announce a new reward scheme for informants to be launched later this year. This will look to target serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes. The scheme will take inspiration from the successful US and Canadian ‘whistleblower' models and will complement the existing HMRC rewards scheme. 

Informants could take home a significant amount of compensation. This will be equal to a proportion of the tax take, ensuring that the scheme raises more money that it costs. Work is ongoing within the government regarding what percentage this could be. Further details will be set out in due course.   

At the Budget in October, the Chancellor announced an injection of over £1.5bn in HMRC to recruit and fund an additional 5,000 new compliance caseworkers and 1,800 debt collection officers. Minister Murray will announce in his speech that an additional 600 new compliance staff will start work this month. Investment in AI is expected to improve the targeting of compliance work and help make HMRC staff more productive. 

This, alongside investment to modernise HMRC systems and legislation to tackle non-compliant tax avoidance and prevent non-compliance will raise £6.5bn per year by 2029/30.   

This will help deliver the Plan for Change by securing tax revenue to help fund investment projects to boost growth. 

Simplifying Tax Admin and Modernising HMRC   

A simple and modern tax and customs system is vital to create the conditions to grow the economy.   

Following the commitment in the Autumn to bring forward measures in the Spring to simplify the tax and customs system, the government will today go further to reduce the time businesses spend managing their tax, so they can focus on what matters most to them: growing and being productive.

The minister will announce a future digital pilot with U.S. Customs and Border Protection to test ways to speed up trade processes for UK and U.S. businesses. In 2024, UK-U.S. goods trade was worth a combined £115bn. 

The aim is to make supply chains between UK and U.S. businesses more efficient through modernising how HMRC systems, international partners and businesses communicate with each other. The pilot will look to make the communications between HMRC, the U.S. and businesses more seamless through better use of digital credentials and real-time data.

The pilot will include testing the ability to issue and share digital trusted trader credentials between UK and U.S. systems.  This would speed up processes for trusted U.S. and UK businesses trading with each other including by making it more easy and efficient to request trade benefits from each country. 

Susan S. Thomas, acting Executive Assistant Commissioner of the U.S.CBP's Office of Trade said: 

“Modernizing trade processes is essential if we are going to keep pace with today's trading environment.  

“We are taking our operations to the next level, bridging gaps between systems, creating a new era of supply chain transparency and data system flexibility.”  

James Murray will announce changes to simplify the tax system. The ITSA trading income reporting threshold will increase from £1,000 to £3,000 gross within this parliament, aligning with the new reporting thresholds for property and “other taxable” income. This means that up to 300,000 taxpayers will not need to file a tax return. This ranges from people trading vintage clothes, dog-walking or gardening on the side, to driving a taxi or creating content online This will help cut waste, avoid unnecessary worry for customers and improve the conditions needed for them to grow.   

Murray will also highlight simplifications to the customs regime to reduce burdens for traders. These include improvements to the Temporary Admission procedure, which relieves import duties for eligible goods that are imported temporarily. For example, the usual time limit for fine art and antiques will increase from 2 to 4 years. 

Ellen Milner, Director of Public Policy, Chartered Institute of Taxation said:

"We welcome the government's focus on simplifying the tax system and improving customer service – rightly two key priorities for HMRC as the tax authority heads into its third decade. A more straightforward, easy to navigate tax system could free up business owners and managers to focus on growing their businesses, rather than spending their days overcoming bureaucratic hurdles. We especially welcome the announcement of a new approach to dealing with slow-moving income tax queries from agents. Hopefully, in due course, this can be expanded to unrepresented taxpayers and to other taxes.” 

ENDS   

Notes to Editors   

• To watch the speech visit HMRC LinkedIn or YouTube
• Changes to ITSA reporting thresholds do not change the amount of tax due, but how taxpayers report income below these new thresholds to HMRC. The £1,000 tax-free trading allowance will remain the same.   

• HMRC recently launched a 'Help for Hustles' campaign to support people earning extra income to understand any tax obligations