UPDATE: The HMRC has just announced a crucial opportunity for British households to enhance their tax-free Personal Allowance by claiming up to £1,000 from side hustles and additional income. This development provides an immediate financial boost for those engaging in secondary income streams beyond their primary jobs.
As reported by investment platform AJ Bell, the so-called trading allowance allows individuals to earn up to £1,000 without incurring tax liabilities. This means that basic-rate taxpayers could save up to £200 annually, while higher-rate taxpayers may benefit by up to £400 per year. This provision is particularly advantageous for individuals involved in part-time work such as babysitting, online selling, or dog-walking.
Laura Suter from AJ Bell emphasizes the simplicity of this allowance: “If you earn £1,000 from property or trading income, it will be tax-free. If your side hustle income falls under this threshold, you typically won’t need to file a tax return. Just keep track of your income documentation for potential HMRC inquiries.”
However, if your earnings exceed £1,000, you will still benefit from this tax break but will need to file a tax return to declare the additional income and pay applicable taxes. This is a crucial detail for anyone looking to maximize their earnings from side activities.
In addition to the trading allowance, Suter notes that individuals with an income of £12,570 or less can take advantage of a £5,000 tax-free savings allowance. This means that interest on savings up to £5,000 remains untaxed, allowing potential savings of up to £1,000 in tax for basic-rate taxpayers.
With the current top easy-access savings account rate at 5%, individuals could maintain up to £100,000 in savings without facing taxation on that interest. Even those earning between £12,570 and £17,570 can still benefit, albeit in a reduced capacity, losing £1 of the tax-free allowance for every £1 earned over £12,570.
This announcement comes at a time when many are seeking ways to supplement their income amidst rising living costs. The HMRC’s provisions provide a pathway for financial relief, encouraging the pursuit of side hustles and smart financial management.
WHAT’S NEXT: Individuals are urged to take advantage of this trading allowance immediately. As the financial landscape continues to evolve, monitoring potential changes to tax regulations will be essential. For those interested in maximizing their income, now is the time to consider side hustles and ensure compliance with necessary tax reporting.
This information is critical for anyone looking to navigate the complexities of tax allowances and is sure to have a significant impact on many British households. Share this news to inform others about how they can benefit from the HMRC’s latest provisions!
