URGENT UPDATE: The HM Revenue and Customs (HMRC) has just announced a groundbreaking provision that allows UK residents to earn up to £1,000 tax-free from side hustles, boosting their tax-free Personal Allowance to £13,570. This new ruling is a game-changer for many looking to supplement their income without the tax burden.
Effective immediately, the HMRC trading allowance empowers individuals to generate secondary income streams—from activities like babysitting, online selling, renting out driveways, or even dog-walking—without any tax implications. Investment platform AJ Bell highlights that “everyone” is eligible for this beneficial allowance, enhancing financial opportunities across the UK.
Laura Suter, a leading financial expert from AJ Bell, stated, “The so-called ‘trading allowance’ means that if you earn £1,000 from property or trading income, it will be tax-free. If you’re a basic-rate taxpayer, this could save you up to £200 a year, or £400 for higher-rate taxpayers.” The implications are significant: this allowance could mean real savings for many households looking to make ends meet or save for the future.
Additionally, Suter emphasized that if your side hustle income falls below £1,000, you typically won’t need to file a tax return. However, it is crucial to keep track of any relevant paperwork in case HMRC requires proof of income later. For those earning more than £1,000, the allowance is still applicable, but a tax return will be necessary to declare any additional income.
This is not the only tax relief available. Suter also pointed out a £5,000 tax-free savings allowance for individuals with an income of £12,570 or less. Dubbed the ‘starting rate for savers’, this provision allows taxpayers to earn interest on savings up to £5,000 without incurring taxes. With the current top easy-access savings account rate at 5%, individuals could hold up to £100,000 in savings before facing any tax liabilities.
The savings allowances can also benefit those earning slightly above the basic threshold. Suter explained, “Even if you earn between £12,570 and £17,570, you could still benefit from this tax-free savings allowance, albeit on a smaller scale.” For every pound earned above £12,570, the tax-free savings allowance decreases correspondingly.
This announcement arrives at a critical time for British households facing rising living costs. As many seek ways to increase their financial resilience, these provisions from HMRC offer a tangible way to mitigate tax liabilities and enhance personal income.
Moving forward, individuals are encouraged to explore these allowances and consider how they can take advantage of this newly confirmed tax relief. The changes could significantly impact personal finance strategies for many across the UK.
Stay tuned for more updates on this developing story as households adapt to these new financial opportunities.
