I’m thinking about supplementing my existing PAYE job with some part-time handyman income. How do I inform HMRC, and what do I tell them so I don’t get hammered for tax later?
First of all you have three months to notify HMRC of your new self-employed activities. Do this to avoid a statutory £100 penalty!!
After that it would be prudent to open a separate bank account and keep the extra income and expenditure separate from your PAYE income, and normal banking arrangements. Remember also to allow for the extra tax (most likely) liable on all the extra income if your existing PAYE job earns you more than the personal allowance award.
You will be asked to submit annual tax returns disclosing all sources of income, but it might be possible to have the extra tax collected by coding deductions operational against your PAYE source. (See our Tallyup section or perhaps our Accounts Peace of Mind section might help you do it right whilst keeping costs down).
I’m a pensioner and HMRC have just sent me a statement out of the blue, stating I owe them for three years under-deducted tax. Must I just accept this and simply pay up?
No – absolutely not. You must first establish how this underpayment arose, and was allowed to re-occur each year. Is this something HMRC could have helped to avoid? If so … they need to at least show you some magnanimity. (See our Tax Peace of Mind section for £35 we will check this for you if you have kept the relevant paperwork.)
I’m a self-employed taxi operator. What basic information must I disclose to HMRC to avoid a tax enquiry?
You must be able to prove that your income and relevant expenditures were derived from contemporaneously kept records. This means keeping prime records in real-time, ie daily takings and daily expenses, and backing them up on a weekly / monthly spread-sheet would easily suffice … see our Tallyup Real-time Accounting Programme. It’s easy peasy to use AND it calculates your tax.