Help!!

fattyboomboom_2

Hi,

I recently started doing some freelance work in my spare time outside of my normal full-time employment.

My other half is a chartered accountant and when doing the tax at college they were taught that if you were in receipt of untaxed income, you must inform the Inland Revenue by 5 October after the end of the tax year that you started to receive the income. (This agrees http://www.taxreturn4u.co.uk/faq.php)
For me that would be October 2009.

However, I have just started to research how to do this with a view to doing it early, but I have now seen forms etc where it says you must register within 3 months of becoming self-employed or face a £100 fine!

I started doing the frelance job I am doing now around May for a couple of hours a week so the job is still not complete but I have received some instalments of the payment for the work done so far.

So which is it? 5 October following end of tax year, or within 3 months? I am so confused and cannot afford a £100 penalty but I thought that what my partner learnt at college would be correct!

Also, am I classed as self-employed or could I just fill in a normal tax return as an employed person with additional untaxed income?

Please help!!

fattyboomboom_2

Oh I have just found that that as my earnings are below the small earnings exemption limit then I will not be fined for late registration.

Phew!

soolin

fattyboomboom wrote: »

Oh I have just found that that as my earnings are below the small earnings exemption limit then I will not be fined for late registration.

Phew!

Oh dear, the income needs to be the total not just the extra income. I was in a similar position, I was working and getting paid via PAYE yet when I started a small business a few years back I was obliged to register with HMRC within 3 months.

jimmo

Sorry, but a bit of a history lesson.
In my “good old days” when tax was dealt with by the Inland Revenue and National Insurance was dealt with by the DSS a person who started self-employment had two separate obligations.
Basically he had to notify the DSS that he was self-employed pretty quickly after starting. This was so because there was an immediate obligation to pay his weekly, Self-employed, stamp.
He had to notify the Inland Revenue that he had become liable to Income Tax from self-employment in good time before the tax became due.
For self-employed people the first time that tax can be due is in the January following the end of the first tax year in which the self-employment commenced.
In recent times responsibility for collecting both tax and Nat Ins has become the responsibility of HMRC.
They have devised a format where you now notify them once that you have become self-employed and that applies to both tax and NI.
However the “old” laws are still valid.
If you have failed to Notify HMRC within 3 months of your commencement of self-employment you have committed an offence against the National Insurance regulations. An automatic penalty of £100 will be charged. However, if, as you say, your self-employment profits are below the small earnings exemption and no Nat Ins contributions are due, the penalty will, eventually be waived.
As regards Income Tax, as you have recently started the self-employment your OH is correct. You have done nothing wrong so far. However if you are making profits there will be tax to pay at the appropriate time.
The way the system works now you will almost certainly have an automatic penalty of £100 charged on your Self-Assessment account but it will eventually be written off. Relax and don’t be swayed by demands. They will eventually be cleared.
I think that is the end of what I can claim to be professional advice but on a personal note, if your OH is a Chartered Accountant he, or she, is certainly, more professionally qualified than me and, I suspect, the vast majority of people here who will offer you advice.
You might want to think about that.