How do I tell the IR I owe them tax?!

sarah_elton

Not really money saving as I need to get rid of money, but hoping someone will know. Wasn't sure which was the best forum so any advice taken there too....

I work full time, large company, and pay tax PAYE, and all is right with the world.

This year I was approached by a publishing company to do some writing and editing on a magazine they're producing in my spare time. I've been doing this since July, and they pay me cash in hand, on a per hour/article basis so amount varies etc. I'm non on their payroll though.

All the money that's come in, I've put a third aside which should cover the tax/NI liability. So basically, come April, I'm going to owe the Inland Revenue money but they don't know that.

Can anyone point me to a really clear and simple explanation of how I go about declaring it. I assume I need to do a self-assessment, but how do I request one, and when are they completed? (i.e. at what point after April)

The IR website is just plain confusing, just need some advice to get started.

By April I will have made in the region of £8k gross from this extra job, so it's not a small amount and I want to do it right with the IR so there's no trouble later.....

CIS

Contact them and ask for a self assessment form nad they'll send it out when its due.

If its paid direct to you, do you not need to register as self employed ?.

Contact the self employment helpline, they'll also be able to sort out a tax return for you.

Call IR main switchboard at Longbenton on 0191 2135000

sarah_elton

I'm really worried I am going to have to register as self-employed.

On the IR site they have a bit 'Are you employed or self employed?' -I actually meet more of the employed criteria, e.g. they assign me work and when to do it, I can't sub contract it, I'm not risking my own money etc etc:

http://www.hmrc.gov.uk/employment-status/index.htm

I think I'm employed but they're being lazy on the payroll etc front by calling me a supplier.

I'm just worried it'll be self employed as 99% of the self employed stuff will be irrelevant - I don't need to know about VAT for instance. As far as I'm concerned it's just extra wages I haven't been taxed on but I'm worried the IR will see it differently and I'll end up regretting telling them...!

sarah_elton

But thanks for all the tips.

Savvy_Sue

Phoning your local tax office is usually worthwhile: I've always found them really helpful.

Cook_County

1. Most people in your position are self-employed. This is GREAT because you get to deduct expenses such as use of home, phone, internet costs and capital allowances on the computer.

2. You will probably want to register as self-employed but ask for deferment of Class 2 NIC since you pay Class 1.

3. You need an accountant or chartered tax adviser to advise you on the best accounting date to choose and what expenses you can claim.

4. The tax for the year ending 5 April 2006 is due on 31 January 2007, so do not spend all of the cash yet!

innovate

I don't think you can register as self-employed whilst you are also employed full time? But when you come to doing your next tax return, you will have to declare both, your income from your full time employment, and any additional income from whatever sources (savings, evening work etc).

If you were to register as self-employed, I believe you need to do this within max 120 (or even less?) days, else you can be fined.

You are very prudent to keep some of your extra earnings to one side for any eventual tax (trust you have the money working for you, e.g. in a high interest instant access savings account?)

An accountant can give you chapter and verse on the legislation - but as Savvy_Sue already said, why not call your local tax office? They are amazingly helpful if you ask for advice, and it will be free. You'll have to 'open the kimono' to them eventually, so why not call on their advice now? May be ask them a theoretical question to start with - e.g. "what if I were to earn another £8K in the current tax year from work carried out in my spare time?".

An accountant is likely to charge you. If the advice you get from the tax office sounds too complicated, you can still engage an accountant.

As long as you don't want to dodge any tax, I think you can relax as far as the HMRC is concerned. But have you checked your contract with your full-time employer - does it allow you to do paid work for somebody else? Especially the larger companies often have clauses in the employment terms that forbid you to assume paid work alongside your employment. Not that the HMRC would tell your employer (at least I don't think so) but they could find out some other way and you might find yourself in difficulties.

Cook_County

innovate is not quite correct...

You MUST register as self-employed within 3 months of starting up to avoid an automatic £100 fine for not registering. But there is no reason why you should not do this even though you are in full-time employment.

I agree 100% that you must check your contract of employment.

As far as asking HMRC a hypothetical question, this is just not what they are in business to do.

A tax professional will save you more money than he or she charges and give you sound advice on insurance needs, tax deductible capital allowances, travel costs, use of home in home costs etc that HMRC are not set up to advise on.

You also need to choose the best accounting reference date, once again an experienced professional will be best placed to assist.

innovate

Cook_County wrote:

As far as asking HMRC a hypothetical question, this is just not what they are in business to do.

A tax professional will save you more money than he or she charges and give you sound advice on insurance needs, tax deductible capital allowances, travel costs, use of home in home costs etc that HMRC are not set up to advise on.

Thanks, Cook_County - I wasn't aware that you can be both, employed and self-employed, at the same time. You never stop learning

I do agree that if you are self-employed, it is worth considering to pay for an accountant.

However, my own experience with the IR/HMRC is that they are incredibly helpful, on all sorts of subjects. They also run free courses throughout the country for people who start up their own business - and there was nothing my accountant (who I engaged before I talked to the IR) could tell me that they didn't tell me, too.

I was initially totally reluctant to call the IR. Hadn't spoken to them in years and had a vision of 'vultures' who were just out to screw money out of me. I had to call them eventually, however, for a very tricky double-taxation query that is not regulated by law but down to the assessment of a Tax Inspector. This is when I found out that they were simply tremendously helpful. I have since heard from a number of other people [especially small business owners] who had just the same experience (on different matters).

The only reason why I still pay my accountant is that I think my time is better spent earning the money to pay an accountant (and a bit more)! Mind you, may be I should also consider changing accountants....

sarah_elton

innovate wrote:

I don't think you can register as self-employed whilst you are also employed full time? But when you come to doing your next tax return, you will have to declare both, your income from your full time employment, and any additional income from whatever sources (savings, evening work etc).

I was hoping it would be this way round, as although self employed means I could probably do some things like my broadband as tax deductible, I just think a tax return for extra earnings would be so much simpler.

innovate wrote:

You are very prudent to keep some of your extra earnings to one side for any eventual tax (trust you have the money working for you, e.g. in a high interest instant access savings account?)

Ohhhh yes.

Sticking it into my Nationwide e-savings, which is a good enough rate yes. I haven't got round to looking for a higher rate yet as there may well be one, but as you say it needs to be instant access.

innovate wrote:

An accountant can give you chapter and verse on the legislation - but as Savvy_Sue already said, why not call your local tax office?

I think after reading all this I will - especially if as you say, I do have to be self employed and there's a time limit.

Was thinking about the tax office that's listed on my payslip, since they already do my PAYE tax?

I don't want to pay an accountant given how much I'm making, but my full time job is actually in a Finance department. I'm not an accountant but I work with 100 of them, and although they're big company accountants several are qualified and should be able to give me some tips at least.

innovate wrote:

But have you checked your contract with your full-time employer - does it allow you to do paid work for somebody else?

Never thought to do that lol! But I did tell my manager at work and she's actually pleased for me, and she knows I turn down work from them if it's getting too much, making me tired and would interfere at work. Should probably have checked my contract before telling her but touch wood it's cool. Might check now you've said though.

They would definitely have a problem if it was for a rival company, as I can't work for one within a month of resigning, but this is completely different to my regular work, and is on a supplier not employee basis so I can decide what/how much I do.

Thanks for all the advice!

sarah_elton

And thanks for all the revised advice.

It's just frustrating it looks like it is self employed.

I just do work at home, and send them invoices. No travel costs, office costs, insurance, staff costs, anything at all so most of the form filling will be irrelevant. Ho hum, must dive in.

Scared now about the £100 fine as I started getting paid in August. Ah well, you live and learn.