UPDATE: New reports confirm that UK households can now claim up to £1,000 tax-free through the HMRC trading allowance. This provision allows individuals to boost their tax-free Personal Allowance to £13,570, providing significant financial relief for those with side hustles or additional income streams beyond their primary jobs.
According to investment platform AJ Bell, the trading allowance empowers “everyone” to earn up to £1,000 without incurring tax liabilities. Laura Suter, a financial expert at AJ Bell, emphasized the importance of this allowance, stating, “If you earn £1,000 from property or trading income, it will be tax-free. For basic-rate taxpayers, this means saving up to £200 annually, or £400 for higher-rate taxpayers.”
This new development is particularly beneficial for those engaging in side activities such as babysitting, selling items online, renting out property, dog-walking, or even selling homemade goods at local markets. The HMRC’s provisions are not only advantageous but also simplify tax obligations. If your side hustle income is below £1,000, you typically won’t need to file a tax return, provided you maintain records of your earnings for potential HMRC inquiries.
For those who earn more than £1,000, the tax break still applies, but a tax return will be necessary to declare the additional income. Suter’s insights clarify that £5,000 tax-free savings allowance is also in play. This “starting rate for savers” allows individuals with income up to £12,570 to earn interest on savings without tax implications. With current easy-access savings rates at around 5%, taxpayers could hold up to £100,000 in savings before facing taxes.
Suter highlighted the attractive nature of these allowances, noting, “If you were taxed on that £5,000 of savings income, it would equate to £1,000 of tax for a basic-rate taxpayer – so it’s a very generous tax saving.”
Even those earning between £12,570 and £17,570 can benefit, albeit at a reduced rate. For every pound earned over the threshold, the tax-free savings allowance decreases correspondingly. For instance, an individual earning £1,000 above the limit can still earn £4,000 in savings interest free of tax.
As this tax-saving opportunity unfolds, individuals are encouraged to act swiftly. The HMRC’s trading allowance opens doors for financial stability and encourages entrepreneurial spirit among UK residents.
As the tax year progresses, potential beneficiaries should be vigilant about their side income and savings to maximize these allowances. The latest updates from HMRC and financial experts highlight the importance of understanding these provisions to avoid missing out on valuable tax benefits.
Stay tuned for more urgent updates as the financial landscape continues to evolve.
