Need help with declaring extra income (too late)

icicat

Hello all,

So I need some help with extra income and tax. I work full time and earn around 50k a year. In my spare time I make craft things and sometimes sell copies to people online. Sounds stupid but I actually had no idea I had to declare this as tax seeing that I was already paying tax working full time.


So the extra income amount between April 2014-15 worked out around £1,856. I rang up hmrc today and declared the amount, explaining that I didnt realise I needed to declair this. The adviser was pretty rude (they are usually nice when I rang in the past) and she kept saying I should have registered as self employed (I tried to emphasise I wasnt aware I had to pay this in until now) which meant I cant fill in self assesment and pay it by this Sunday (cutoff date).

So my only option was to add the amount to my tax code. She tried to explain what this meant though my brain wasnt picking it up at the time so thinking about it now just to clarify, does this mean in April this year they will send me a bill for the outstanding tax on the extra income for 2014-2015? However before April I should notify them on my 2015-2016 earnings so they can change the tax code to suit that? Should I still register as self employed in the meantime?

Also a friend said its not a good idea to mess with my tax code if the company I work for has to deal with it. So come this April if I just fill out a self assessment for 2015-2016 should this automatically adjust my code without me having to phone and inform them?

I would ring hmrc again but I dont want to wait an jour on hold and chance talking to the scary woman!

If you took the time to read all this thanks and any advice would be great.

Darksparkle

You should have registered before 5th October. If you haven't and it's been dealt with through your tax code then leave it at that for 2014/15.

Your post doesn't make it clear which tax year they are changing your code for, this one or next. Either way, you won't get a bill but will pay the additional tax through your employment.

Your employer shouldn't care, takes 2 minutes for them to update a tax code.

Register for self assessment for 2015/16, you need to do this by 5th October 2016, although the sooner the better. You'll then pay the tax bill that way in future. For 2015/16 you'd pay by 31st January 2017.

[Deleted User]

Darksparkle wrote: »

You should have registered before 5th October. If you haven't and it's been dealt with through your tax code then leave it at that for 2014/15.

Your post doesn't make it clear which tax year they are changing your code for, this one or next. Either way, you won't get a bill but will pay the additional tax through your employment.

Your employer shouldn't care, takes 2 minutes for them to update a tax code.

Register for self assessment for 2015/16, you need to do this by 5th October 2016, although the sooner the better. You'll then pay the tax bill that way in future. For 2015/16 you'd pay by 31st January 2017.

Things may have changed since my day but it used to be that HMRC could not change a code number in the tax year that the underpayment was calculated. In this case it could not therefore be coded out unti 2016/17. If you consider 2014/15 P800 calculations issued now - no underpayment will be coded until next year -2016/17. Hope that helps!

icicat

Thanks for the replies all, they really help.

Darksparkle: That's a good point. If they changed the code now would this be for 2015-16? So I am being taxed my earnings from 2014-15 within the 2015-16 tax year? This is what confuses me. If I earned a higher amount within 2015-16 I would need to inform them by April so they can adjust the code, or if I earned over £2500 I can go back to my old tax code and start filling in self assessment? If I earned less than the 2014-15 extra earnings in the 2015-16 tax period would they owe me money because they charged me more? Hope this makes sense as my brain is spinning right now

purdyoaten2: That may be true as I think they mentioned I will be billed the amount I haven't been paying from April last year up to now.

By the way, should I be claiming expenses back from these earnings? Would I need an entirely separate form for this?

Darksparkle

icicat wrote: »

Thanks for the replies all, they really help.

Darksparkle: That's a good point. If they changed the code now would this be for 2015-16? So I am being taxed my earnings from 2014-15 within the 2015-16 tax year? This is what confuses me. If I earned a higher amount within 2015-16 I would need to inform them by April so they can adjust the code, or if I earned over £2500 I can go back to my old tax code and start filling in self assessment? If I earned less than the 2014-15 extra earnings in the 2015-16 tax period would they owe me money because they charged me more? Hope this makes sense as my brain is spinning right now

purdyoaten2: That may be true as I think they mentioned I will be billed the amount I haven't been paying from April last year up to now.

By the way, should I be claiming expenses back from these earnings? Would I need an entirely separate form for this?

Purdy has said it will be your 2016/17 tax code that will change. So that's how you will pay for 2014/15 tax.

For 2015/16, as you are self employed you should be registering for self assessment. The £2500 limit applies to other untaxed income eg interest. HMRC asks that all self employed register as such and complete self assessment. This is how you declare your turnover, deduct expenses and pay tax (and NIC where appropriate).

[Deleted User]

Could be a double hit though. HMRC could include the potential underpayment for 2015/16 AND the tax due for 2014/15 in the 2016/17 code number.

Darksparkle

[Deleted User] wrote:

Could be a double hit though. HMRC could include the potential underpayment for 2015/16 AND the tax due for 2014/15 in the 2016/17 code number.

Wouldn't the OP need to ask for that to happen though?

[Deleted User]

Darksparkle wrote: »

Wouldn't the OP need to ask for that to happen though?

HMRC most likely will do as I suggested. The op could ask for the opposite though and insist that 2015/16 is NOT collected by deduction from his code number in 2016/17 - the argument is that the liability under SA is not due until 31st January 2017. I was underpaid in 2013/14 (not a surprise) and this was coded in 2015/16. I knew that I would also be underpaid for 2014/15 and HMRC assumed this also and tried to code the potential underpayment also in 2015/16. I told them where to go, it was removed and I paid it two days ago.

Cook_County

As this a business the OP will need to calculate the profit or loss for tax purposes for each accounting period and any available capital allowances. Once this is calculated, the profit or loss can then be allocated to the correct UK tax year(s).


Any tax that might be due on any profit can potentially be collected through PAYE, but it would make more sense to register for self-assessment.

dori2o

There was no need to change the code at all if the OP didn't want it done that way.

HMRC must allow at least 3 months to complete a Self Assessment tax return after the request to file one is issued, therefore the OP could still have been set up in SA (which can be done over the phone there and then with the taxes adviser) and would have been given 3 months and 7 days from the date on the notice to file, they could also have submitted a paper tax return for this year as the 3months applies for both paper and online filing.

The only date that would have remained at 31 January would have been the payment date, but so long as the household isn't receiving child benefit then the OP could have simply paid 40% of £1856 on/before 31/01, by cheque if necessary as it would have been backdated anyway. Plus if it was late then so long as it was paid before 01/03/16 it would only be interest charged not the late payment penalty, and at 3% per annum it's pennies not pounds (approx 6.1p per day)

Having now done it the way they have it's likely the following will happen:

2014/15 P800 tax calculation issued confirming approx £742 due which will be collected in 16/17 tax code.

2015/2016 tax code possibly updated to include other earnings £1856. This will create a potential underpayment in the current tax year of approx £615.

2016/2017 code to be issued (anytime now) this may now include:

Other earnings £1856
Underpayment restriction to collect £1360 (£742 underpaid tax 14/15 and £615 potentialunderpayment 15/16, assuming that the other earnings have been included in the 15/16 code)

As the OP is not yet in self assessment the the potentialunderpayment will automatically be carried forward to 16/17, the OP cannot object to this if he wishes the £1856 (or the updated amount) to remain in his 15/16 tax code.

OP in order to prevent the potential underpayment for 15/16 being carried into the 16/17 tax code you would need to call HMRC and ask for the amount of other earnings to be removed from your 15/16 code (if they have been included).You could also then register for Self Assessment for the 2015/2016 tax year at the same time which would mean you would be issued a notice to file a tax return on or shortly after 6 April. You would then have until 31/01/17 to complete the return and pay the tax due for 15/16, or if you wouldlike the tax to be collected via your tax code in 17/18 then you must complete the return and it be processed before 30/12/16.

SeniorSam

In general people making craft items in their spare time never make any profit as the raw items, tools and equipment far outweigh what thay are likely to receive.

I also do this craft thing now I have retired and although I do declare what income I receive, the expenses are far greater so I do not pay tax on that.

Explain to the taxman, but you should have declared it.

Sam