It’s a common scenario, you’ve started your own business but you’re being sensible and aren’t giving up your steady, full-time job until you’re sure that your new venture is going to be a success. This situation could result in you generating a second income, significant or otherwise, but an income all the same, and one where HMRC is cracking down hard with their ‘Second Incomes Campaign’
So what is a second income and who does it apply to?
Second income rules apply to you if you’re an employee living in the UK and generating an additional income from working for yourself.
Your additional income might come from:
- consultancy fees e.g. providing advice or expertise
- party and event planning e.g. cosmetic parties
- providing personal services e.g. taxi driving, hairdressing, fitness training or child-minding services
- making and selling items that you’ve made yourself e.g. cakes, jewelry or craft items
- buying and then selling goods on at market stalls or car boot sales
The HMRC Second Incomes Campaign
HMRC has taken the latest step in its crackdown on undeclared income, with the launch of this ‘voluntary disclosure’ campaign.
It targets individuals who fall into the criteria described above, e.g. they are employed, resident in the UK, and receiving additional income for which they are currently not paying tax.
The voluntary disclosure scheme offers taxpayers the opportunity to correct their tax affairs, under the best possible terms likely to be offered by HMRC.
To take advantage of the scheme individuals need to notify HMRC that they wish to take part. They should then complete a disclosure form and pay what they owe to HMRC within 4 months of receiving acknowledgement from them.
If you do have a second income and don’t make a voluntary disclosure you could face a higher penalty or criminal prosecution at a later stage, so it’s worthwhile taking advantage if you know that it’s likely to haunt you in the future.
So what should you do?
HMRC have created a short video ‘Do you have a second income?’ (click link to view) to help you make sense of the Second Incomes Campaign.
You need to tell HM Revenue and Customs (HMRC) if your additional income hasn’t been taxed through either:
- your main job
- another Pay As You Earn (PAYE) scheme
- Self Assessment
How to tell HMRC about additional income
You need to do a couple of things to let HMRC know that you want to take part:
- Complete a notification form
- Complete a disclosure form to disclose and pay what you owe within 4 months of receiving HMRC’s acknowledgement of your notification. If you need more time to pay then you should call HMRC time to discuss your options
There are two HMRC calculators that you can use to work out what you owe depending on how many years of unpaid tax you’ve accumulated. You should only use these calculators if:
- your tax affairs are straightforward
- you’re only entitled to basic personal allowances
If your tax affairs aren’t straightforward then you should seek advice from a tax professional who should be able to set you in the right direction.
Contact us if you need any help
If you’re unsure of how to tackle disclosing your second income or for general tax advice give us a call on 0141 418 6550 and we’ll help you bring your tax affairs up-to-date.
To discuss this post contact Stephen Usher on 0141 418 6550 or email@example.com