Small untaxed earnings

SeanW

I have a small website I operate, which contains some google adsense adverts. This is in addition to full time employment.

It doesn't make huge amounts of money, but still, I declared the 2005/2006 earnings to the Inland Revenue by a letter in 2006. They subsequently modified my 2006/2007 tax code to recover the amount owed.

Come April 2007, I wont have paid all that I owe, because the tax code was modified half way through the tax year.

The earnings are not guaranteed, they are performance related, and also differ with exchange rates (They are paid in US$).

I have received 2007/2008's tax coding, and this is how they appeared to have worked it out:

£x is owed from 2005/2006
£y is owed from 2006/2007 (estimate, as I haven't declared the real figure yet, I don't know it!)
£z will be earned during 2007/2008 (estimate, as I haven't even started earning it yet!)

Does this seem right?

I expected the £x and £y, but I thought I would pay the £z in 08/09 tax code, i.e. in arrears, after the tax year.

They don't ask me to fill in a tax return because the amount isn't that big, but I'd rather have had that money in my bank account earning interest! I'd be quite happy to pay by cheque the amount I owe in the January following the end of the tax year. I also don't write any expenses off this amount other than the cost of hosting the website.

Hoddie_2

Yes that is correct. They will ask you to pay the tax due on the 07/08 commission during 07/08 - they'll obviously need to include an estimate in your code and they'll base this on the latest information you provided.

You can request that they don't collect the tax through your PAYE code, but this will mean you're put into the SA system, otherwise they will ask you to confirm the actual amount by the end of September following the end of the tax year in question, and any extra tax due will be collected during the year starting the following April. For example...

Estimate of £200 included in your 07/08 code.
Before September 2008, you confirm the actual amount earned was £350.
They collect the tax due on the £150 through your 09/10 code.

There is a chance that they will collect some tax you owe for 07/08 during 08/09, but only if you provide a revised estimate and they adjust your 07/08 code during the year. For example...

Estimate of £200 included in your 07/08 code.
You advise them the estimate needs increasing to £300.
Before September 2008, you confirm the actual amount earned was £350.
They collect some of the tax due on the £100 through your 08/09 code.
They collect the tax due on the £50 through your 09/10 code.

SeanW

Thanks. I was told the first time I called I would pay in arrears after telling them by letter, but as I had guessed and you have confirmed, it appears they will collect as I earn based on estimates, maybe she meant just for the first year.