If you have a side hustle, read the small print on higher tax thresholds, lessons learnt by failed businesses and new legislation aims to drive building boom
If you have a side hustle then you may need to read on to find out how HMRC are changing rules related to tax for anyone with a self-employed trading income. We also explore key lessons learned by businesses which failed and how to avoid a similar outcome, and good news as new legislation aims to drive a building boom.
Higher tax threshold for side hustles: What could it mean for you?
Last week, the tax minister responsible for HM Revenue and Customs (HMRC), James Murray, delivered a speech marking the 20th anniversary of HMRC. Previously, the UK’s tax authority was known as Inland Revenue.
During the speech he highlighted some simplifications that are planned. Of particular interest was the announcement of plans to increase the Income Tax Self Assessment (ITSA) reporting threshold for gross income from £1,000 to £3,000.
Who would benefit from this change?
This threshold would apply to anyone with a self-employed trading income, however it can be particularly useful to those with a side hustle. A side hustle is an income-generating activity that is pursued alongside a full-time job or main source of income.
Some have a side hustle for trading clothes online, doing some dog-walking or gardening, or creating online content. Currently if income from these activities exceeds £1,000 then it is likely that a tax return needs to be completed and filed.
However, if the threshold is increased to £3,000 it is estimated that up to 300,000 people will no longer need to complete a tax return. This could be very welcome news for some, although it is important to remember that the £3,000 threshold relates to the requirement to submit a self assessment tax return – the £1,000 trading allowance will not change. Someone with a side hustle that generates £1,200 of income would need to report their trading income through a new online service and will pay tax on the £200 after the £1,000 trading allowance has been deducted.
When will this happen?
Unfortunately no definite date has been mentioned, only the promise that it will happen “within this parliament”. So, we may have a few years yet.
If you would like to know whether you need to complete a tax return for your self employed business or side hustle please get in touch. As tax experts we can help you minimise any tax you owe and would love to help you!
Five business failures and the lessons they teach
Success in business is never guaranteed, even for brands that dominate their industry for decades. A recent episode of the BBC Radio 4 show, Toast, explored five once-thriving companies: Little Chef, Vine, Mothercare, Green Shield Stamps and Safeway.
Each of these businesses were very successful for a period of time, but for one reason or another ultimately failed. Their downfall may have been caused by a number of contributing reasons including:
- Failing to adapt to market trends or changing customer priorities.
- Not innovating, which led to obsolescence.
- Innovating but failing to find a sustainable revenue model.
- Mismanagement.
Their stories offer valuable insights that can help you avoid their mistakes with your own business.
New legislation aims to drive building boom
The Planning and Infrastructure Bill was introduced to Parliament last week. The legislation is being heralded as bringing transformative reforms to the UK building sector that will boost homebuilding and remove obstacles to needed infrastructure.
Here is an outline of some of the measures introduced by the legislation.
Planning committees
A national scheme of delegation will specify which types of applications are to be determined by officers and which by planning committees. There will be limits on the size of planning committees and planning committee members will have mandatory training.
Councils will also be able to set their own planning fees.
Nature Restoration Fund
A Nature Restoration Fund will be established so that payments made into the fund allow building to proceed. Contributions will be pooled so that larger environmental interventions can be funded.
Compulsory purchase reform
The compulsory purchase process for buying land for public interest projects will be adjusted. The reforms will mean compensation paid to landowners is not excessive and the process by which ‘hope value’ is removed when it’s justified in the public interest will be sped up.
While these adjustments aim to speed up the development of public interest projects, landowners may not see these changes as an improvement.
Development Corporations
Development Corporations have been used in the past where the risk or scale of a development is too large for the private sector, for example in building post-war new towns.
The legislation will strengthen Development Corporations so that it will be easier for them to deliver large-scale developments, such as new towns that include affordable housing, GP surgeries, schools and public transport alongside new homes.
Strategic planning
Across England there will be a system of ‘strategic planning’ known as spatial development strategies. This will make it possible to consider needs across several local planning authorities and determine where the most sustainable building areas are, making sure that the requirements for development and infrastructure are joined up.
National Significant Infrastructure Projects (NSIP)
Consultation requirements for national projects like windfarms, railway lines or roads are to be streamlined under the new legislation. Infrastructure applications are assessed against national policies, so these policies will now be updated at least every five years.
The Highways Act and the Transport and Works Act are also to be updated so that bureaucracy on transport projects is reduced.
Challenges to government decisions on major infrastructure projects will also be limited. Meritless cases will have one rather than three attempts at legal challenge under the new legislation.
Clean energy
The legislation will help approved clean energy projects be prioritised for grid connections.
Bill discounts
The government are anticipating that around twice as much new transmission network infrastructure – overhead cables, pylons, substations etc – will need to be built by 2030 as was built in the past decade.
As an incentive to accept these changes, those living within 500m of new pylons will be given money off their electricity bills for 10 years.
Developers will also be given new guidance on providing benefits such as sports clubs, educational programmes or leisure facilities to communities that host transmission infrastructure.
Reaction
Unsurprisingly the legislation was greeted by positive comments from government and large homebuilder representatives. However, Brian Berry, Chief Executive of the Federation of Master Builders, chimed in with a comment for smaller builders.
He noted that only around 10% of new homes are being built by SMEs today, compared with 40% in the 1980s. He cited the planning system as the number one issue holding back the delivery of new homes, with availability and viability of land also contributing. He said: “Supporting small builders through the planning system and reducing unnecessary bureaucracy will be key to opening up small sites, and today’s announcement will be welcomed by many across the industry.”
Legislation takes time to clear parliamentary process, but we look forward to seeing a good effect from the reforms for our construction industry clients.
See: https://www.gov.uk/government/news/biggest-building-boom-in-a-generation-through-planning-reforms