The UK tax system is undergoing a notable shift with HMRC’s latest announcement: the income tax self assessment (ITSA) reporting threshold for trading income will increase from £1,000 to £3,000 within this parliament.

This change is set to impact thousands of taxpayers, particularly those with side incomes from activities like selling clothes online, dog-walking, gardening, taxi driving, or content creation. While it does not affect the existing £1,000 trading allowance, it means that many small-scale traders will no longer need to file a tax return if their sales remain below £3,000.

What does this mean for taxpayers?

The trading allowance of £1,000 remains in place, meaning that those earning up to this amount in trading income won’t have to pay tax. Those earning over £1,000 but within the new £3,000 threshold may still have some tax to pay but will not be required to submit a self assessment return. Instead, HMRC plans to introduce a simpler online method for settling small tax liabilities.

This shift is expected to benefit up to 300,000 taxpayers, of which around 90,000 will have no tax to pay at all. For those required to pay tax, the streamlined process aims to reduce administrative burdens.

New support service for tax agents

HMRC is also set to launch a new escalation service for agents handling self assessment and PAYE queries that are over four weeks old. The dedicated team, consisting of experienced tax technicians and advisers, will take full ownership of cases and maintain direct communication with agents to ensure faster resolutions. This service is expected to be operational by the end of the month.

Other key announcements from HMRC

Several additional measures were unveiled, including:

• Voice biometrics for security – HMRC will introduce a voice recognition system for taxpayers calling its helplines. The technology aims to strengthen security and reduce call times.
• Crackdown on ‘phoenixism’ – HMRC and the Insolvency Service will increase their efforts to combat companies that repeatedly evade tax by declaring insolvency and reopening under a new name. One approach involves requiring upfront tax payments from new businesses deemed at risk.
• Enhanced informant rewards – A new incentive scheme will be introduced to encourage whistleblowers to report tax fraud, focusing on large corporates, wealthy individuals, offshore activities, and tax avoidance schemes.
• Consultation on R&D tax relief and investment clearances – In spring 2025, the government will seek views on expanding advance clearances for research and development tax relief and investor incentives for major projects.
• Easier customs procedures – Adjustments to the temporary admissions customs procedure will extend the time limit for fine art and antiques imports from two to four years, simplifying the process for affected sectors.
• UK-US trade pilot – A new digital pilot scheme with the US will explore ways to enhance trade efficiency by enabling secure, real-time data transfers between businesses and tax authorities.

What does this mean for you?

The increase in the self assessment reporting threshold is a welcome change for many, reducing unnecessary tax filings and making compliance easier for those with modest trading income. Meanwhile, the broader reforms signal HMRC’s push for greater efficiency, security, and enforcement in tax administration.

For personalised tax advice and assistance, visit www.vectigalistax.co.uk or contact angelo@vectigalistax.co.uk.