Should UK's Side-Hustle Taxes Be Relaxed? Online Platforms Seem to Think So

A growing number of voices in the business community are urging Chancellor Rachel Reeves to relax tax rules for side-income earners, something they claim could unlock wider economic growth. Online platforms including eBay, Vinted, Depop and Etsy have jointly called for the current £1,000 (approximately $1,250) trading allowance to be tripled. They argue this change would reflect current economic realities and provide a platform for small-scale entrepreneurs to flourish.

The trading allowance lets people earn up to £1,000 tax-free on side work in addition to their main income. Once that threshold is passed, they are required to register for self-assessment and pay tax on additional earnings. Inflation and increased living costs have steadily reduced the value of this allowance since it was introduced.

Online Platforms Push for Higher Threshold

In a joint letter to the Chancellor, senior executives from the online retail sector argued that raising the trading allowance to £3,000 (approximately $3,760) would support the country's push for sustainable growth. The letter states that such a move would help foster an entrepreneurial culture and make side income more viable, particularly for those in transition between jobs or looking to boost their income. It also highlights how side businesses often become fully established ventures.

The signatories of the letter include Eve Williams, General Manager of eBay UK; Adam Jay, CEO of Vinted Marketplace; Peter Semple, CEO of Depop; and Jeffrey Zubricki of Etsy. They were joined by representatives from the Federation of Small Businesses, Tech UK, and Enterprise Nation. These organisations represent a wide range of workers who rely on flexible income streams.

The joint message was clear: the Government needs to adapt tax policy to fit the changing landscape of modern work. This includes acknowledging the growing number of people relying on part-time self-employment and online sales.

Pressure Ahead of Autumn Budget

With tax rises expected in several areas, including recent National Insurance hikes for employers, businesses are lobbying hard for measures that they say would ease the burden. The hospitality and retail sectors, in particular, have voiced concerns that tax increases have made it harder to hire staff and plan for long-term investment.

Raising the trading allowance would also align with previously announced plans to increase the threshold for mandatory self-assessment reporting. The Treasury has already committed to raising this reporting threshold from £1,000 to £3,000 by the end of the current parliament. However, this change only affects reporting obligations, not the point at which income becomes taxable.

Under the proposed new allowance, basic-rate taxpayers could potentially retain an additional £400 (approximately $500) before tax is due. Ms Williams of eBay suggested that this could give early-stage businesses more funds to reinvest, creating a positive economic cycle.

Policy vs. Practice: The Current Gap

At present, anyone earning more than £1,000 from side jobs must complete a full self-assessment process, even if the income is modest. This has added weight for sellers who may only be earning small sums from platforms like Vinted or Etsy. Although changes to reporting rules may reduce this burden, campaigners say it doesn't go far enough.

In their letter, the platform leaders said: 'By lifting the trading allowance to £3,000, the Government can unlock latent entrepreneurial potential across the country.' They added that many new sellers are from underrepresented groups or are returning to work after a break, and that tax relief could support them at a crucial time.

A Treasury spokesperson acknowledged the issue, stating: 'As part of our Plan for Change, we are raising the reporting threshold to £3,000, to free up time for up to 300,000 traders who will benefit from simpler, online reporting instead of a full tax return.'

Whether the Chancellor responds to the calls remains to be seen. But as online work and casual selling continue to expand, pressure is likely to mount for a review of how side incomes are taxed.