The deadline is fast approaching for self-employed people who exceed the annual trading allowance
Certain workers across the UK have been warned to make sure they do not miss a vital deadline this weekend or risk a fines of over £900. Self-employed people who exceed the £1,000 annual trading allowance need to register for self assessment by October 5.
Experts have warned this can also include people with what they consider to be a ‘side hustle’. A side hustle is defined as any casual job or business separate from your main job that aims to earn you extra income.
As reported by the Daily Record, it is particularly the younger generations who are making substantial earnings from these side hustles and need to be mindful of the impending HM Revenue and Customs (HMRC) deadline. Research conducted by personal finance site Finder revealed that over a third of people with side hustles (35 per cent) earn an average of £20 or more each week, which means they could surpass the £1,000 annual trading allowance.
Kate Steere, money expert at Finder, commented on the looming deadline, saying: “Side hustles are becoming increasingly popular as household budgets are squeezed by inflation, but many people don’t realise they could be liable for tax even if they’re earning a relatively small amount on the side each month. All it takes is earning more than £80 a month, and you’ve exceeded the £1,000 yearly limit.”
She added: “If you’re in this boat, while you don’t need to submit your tax return until the end of January, you do need to register for Self Assessment before 5 October. Miss this, and you could face a failure-to-notify penalty.
“While you’re at it, why not give your future self a break by opening a dedicated business account? Separating your personal finances from your side hustle income will make the whole process that much smoother when it comes to filing your tax return.”
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Finder is urging those considering launching a side hustle not to be deterred by the thought of completing a Self-Assessment tax return if they earn over £1,000. Simply understanding the regulations, which are outlined on GOV.UK, can make the experience enjoyable and lucrative, with no danger of penalties.
The financial specialists stated: “There are loads of ways to make money online – from completing surveys to trading in your old electronics. Just make sure you’re up to date on the tax rules if you move from just topping up your income to a full-blown side hustle.”
Penalties
The fines for overdue tax returns are:
- An initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
- After three months, additional daily penalties of £10 per day, up to a maximum of £900
- After six months, a further penalty of five per cent of the tax due or £300, whichever is greater
- After 12 months, another five per cent or £300 charge, whichever is greater
There are also extra penalties for paying late of per cent per cent of the tax unpaid at 30 days, six months and 12 months. If tax remains outstanding after the deadline, interest will also be charged on the amount owed, in addition to the penalties above.
Who is required to submit a self-assessment?
Even if they pay taxes through PAYE, taxpayers may need to fill out a tax return if they:
- Are self-employed and have gross income over £1,000
- Are self-employed and earned up to £1,000 and wish to voluntarily pay Class 2 NICs to protect their entitlement to State Pension and certain benefits
- Are a partner in a business partnership
- Had a total taxable income of more than £150,000
- Have received any untaxed income including pension income over £2,500
- Received income over £1,000 from trading or providing services online
- Have to pay the High Income Child Benefit charge
- Received interest from banks and building societies or investments (more than £10,000)
- Received rental or letting income from UK land and property
If someone regularly sells goods or provides services through an online platform, they may need to pay tax on their income.
More information can be found on the Government website here.