Tax Free Allowances

DanM2013

Hi,

Brand new to this forum so i'm hoping someone can help. I'm really confused on Tax Free allowances!!!

I'm currently employed by a company and pay tax on all of my income/national insurance etc as per usual, so no issues there. Last year I did some private work for a friend where I was writing some articles for his website, and he agreed to pay me for any sales that he made. Through this I ended up making about £1,200, which I need to invoice him for in order to get.

This is a one off payment and i'm not doing it again, so I want to avoid filling in a tax return if I can at all help it, so I started to read about the tax free allowance, which I believe is set to around £9,400 for 2013/14.

With my normal employed pay and this amount, I would go over the standard tax free allowance as far as I can see, or would it be possible to state that the £1,200 that I made through my own work is attributed to my personal tax free allowance?

I'm really confused about this all and have read countless articles on the HRMC, Which? and Money Saving Expert websites and can't seem to answer my question...any information anyone could provide would be greatly appreciated!!

jimmo

We all get 1 tax free allowance each year to set against our total income and, as you paid tax in your regular employment your allowance has already been used up.

Provided you earned less than £40k in your regular job the tax on the £1,200 private work will be (1200 @20%) £240.

It is entirely possible that you have incurred allowable expenses whilst earning that money and reduce the tax by 20p for every £1 you spent but, as a one-off, you need to decide whether it is worth your while to claim.

If you are content to pay the £240 you should phone, or write to, HMRC and tell them you earned £1200 as a one-off. They will almost certainly deal with that without the need for you to complete a tax return.

Definitely not the cheapest option taxwise but the easiest.

DanM2013

Thanks for this. Really I want to do what is correct and most hassle free!

If I earn over 40k for my regular employment will the tax band for this £1,200 be set at 40%? And can I still just contact the HMRC to let them know or again will I need to fill in a return?

Thanks again

John_Pierpoint

Might HMRC simply knock £1,200 off the personal allowance for 2014/15 and collect the missing tax that way ?
That response may or may not be satisfactory from the OP's point of view depending on budgeting and how close to higher rate (40%) next years total for savings interest etc. plus wages is likely to be.

agrinnall

You really shouldn't be afraid of filling in a tax return, it is really very straightforward with online self assessment if your affairs are reasonably simple (or even if they're not so simple), and you may find that you end up paying less tax overall than you would if you just declare the additional earnings to HMRC.