Extra Income Threshold Rising from £1,000 to £3,000
The UK government has announced a major change that will impact thousands of people earning additional income through freelancing, selling online, or running small part-time businesses.
From March 2025, the threshold for reporting this type of income will rise from £1,000 to £3,000, reducing paperwork for many and simplifying how smaller earnings are taxed.
The change is designed to make life easier for those bringing in money alongside their main job. But what exactly is changing, when will it take effect, and what does it mean for you?
What Was Announced and When
In March 2025, Treasury Minister James Murray confirmed that the threshold for when individuals must file a Self Assessment tax return because of trading income will increase from £1,000 to £3,000.
The move is part of a wider plan to streamline the tax system, cut unnecessary paperwork, and make compliance less burdensome for people with modest extra earnings.
When Will the Change Take Effect?
The government has committed to introducing the new threshold within this Parliament, which means it will be in place by the end of 2029 at the latest.
While no exact start date has been confirmed, HMRC has said a simplified online reporting service will be introduced to make declaring small amounts of income quicker and easier.
What the New Rules Mean
Here’s how the change will work in practice:
- Earnings under £1,000: No reporting or tax is required, thanks to the existing trading allowance.
- Earnings between £1,000 and £3,000: You will still need to pay tax on profit, but instead of filing a full Self Assessment, you will be able to declare it through a simpler online system.
- Earnings above £3,000: No change. You must continue to file a full tax return and declare income and expenses in the usual way.
What Stays the Same
It’s important to note that the £1,000 tax-free trading allowance remains in place. That means if your extra income is below this figure in a tax year, you don’t need to report it at all. For those earning more, tax is still due on profits over the allowance; the main difference is how that income is reported.
Why This Change Matters
- Less paperwork: Many people with small amounts of additional income will no longer need to complete a full tax return.
- Encouragement for entrepreneurship: Reducing administrative barriers may inspire more people to test out business ideas or flexible ways of earning.
- Time and stress savings: The simplified system should make it easier for individuals to stay compliant without the complexity of full Self Assessment.
- Government focus on the gig economy: One of the driving forces behind this change is the rise of the gig economy and online trading platforms. By raising the threshold and simplifying reporting, the government hopes to capture more income from people selling on eBay, Vinted, Facebook Marketplace, or earning through social media influencing and other digital platforms.
- Impact on many households: Around 300,000 people are expected to benefit from the change, with roughly 90,000 no longer needing to report at all.
What You Should Do Now
Until the new system is rolled out, it’s important to:
- Keep clear records of any additional income and expenses.
- Check your total taxable income, as combining extra earnings with your main job could still require a Self Assessment.
- Stay updated on HMRC announcements about when the new reporting system will launch.
- Seek advice if you’re unsure how the changes apply to your situation.
In Summary
The reporting threshold for extra income will rise from £1,000 to £3,000, a change announced in March 2025 and due to be implemented by the end of this Parliament. This update will mean less admin for thousands of people, though tax will still be payable on profits above £1,000.
For those earning a little on the side, this is a welcome simplification, freeing up time to focus on what matters most.
Need help and advice when it comes to self-assessment? Get in touch with our team of experts.