Paying tax on freelance income when main job is PAYE

ajs92

Hello,

My partner was unemployed from Apr-Sep 2020, apart from some odd freelance work which added up to £1250. He then got a job and ended up going over the personal tax allowance for the year, paying tax through PAYE. He never registered as a freelancer or sole trader, as he’s been in PAYE employment ever since. 

My question is about the £1250 he earned from freelancing in 2020/21. Does he need to pay tax/NI on the whole £1250, or just £250? Ie does the £1000 trading allowance apply here if he already reached his personal tax threshold through PAYE employment? Also, what would be the deadline for paying this tax?

Any help is much appreciated! 

[Deleted User]

The trading allowance is a separate allowance to the ordinary personal allowance. His profit would appear to be £250. No NIC would be payable. 

The question is - is this income likely to recur? If not, I would be informing HMRC of the £250 profit and the common sense approach would be to adjust his PAYE code to collect the £50 tax that is due.

If it is likely to recur, he needs to register for self assessment and submit a tax return by 31st January 2022, the same date by which this tax is payable. As time is against him, it may be better to adopt the first approach and, should the situation arise again, register immediately.

Jeremy535897

As the gross income exceeded £1,000, it needs to be declared on a self assessment tax return for 2020/21. See:
https://www.gov.uk/register-for-self-assessment

This must be filed, and the tax paid, by 31 January 2022. If the income was a one off, the preferred solution may be to complete box 17 of the SA100 and register as not self employed (see above link), but it will depend on the facts. A form SA1 should have been completed by 5 October 2021.

If your partner was self employed, he should have registered as self employed and completed a form CWF 1 by 5 October 2021. The problem is that your partner needs a UTR (unique taxpayer reference) and a government gateway account, and this may well not be set up by 31 January 2022, the time limit for filing.

Dazed_and_C0nfused

But the 31 January 2022 filing deadline won't apply to the op as they haven't been sent a return/notice to file.

They will have three months from when a return/notice to file is issued to file the return.

But should pay the tax due asap as interest will be charged on anything paid after 31 January 2022.  Although if the tax due is £50/£52 the interest would be minimal.

[Deleted User]

Jeremy535897 said:

As the gross income exceeded £1,000, it needs to be declared on a self assessment tax return for 2020/21. See:
https://www.gov.uk/register-for-self-assessment

This must be filed, and the tax paid, by 31 January 2022. If the income was a one off, the preferred solution may be to complete box 17 of the SA100 and register as not self employed (see above link), but it will depend on the facts. A form SA1 should have been completed by 5 October 2021.

If your partner was self employed, he should have registered as self employed and completed a form CWF 1 by 5 October 2021. The problem is that your partner needs a UTR (unique taxpayer reference) and a government gateway account, and this may well not be set up by 31 January 2022, the time limit for filing.

Yes - all as it should be. However I had an almost identical scenario recently where, while the profit was slightly higher, HMRC agreed to adjust the tax code while indicating that they would consider issuing a return for the following year. There was no time issues though and the liability was lower (£36). Sometimes it is all about who one gets on the other end of the phone. 

Jeremy535897

Dazed_and_C0nfused said:

But the 31 January 2022 filing deadline won't apply to the op as they haven't been sent a return/notice to file.

They will have three months from when a return/notice to file is issued to file the return.

But should pay the tax due asap as interest will be charged on anything paid after 31 January 2022.  Although if the tax due is £50/£52 the interest would be minimal.

In practice, to pay the correct tax by 31 January 2022, you need to file the return by 31 January 2022.

sheramber

You need an utr to pay the tax.

Jeremy535897

sheramber said:

You need an utr to pay the tax.

As I said in my first post.

Dazed_and_C0nfused

This should help

https://www.icaew.com/insights/tax-news/2021/nov-2021/how-to-pay-self-assessment-liabilities-without-a-utr

[Deleted User]

At the risk of labouring the point, while rules are rules, sometimes it just doesn’t make practical sense to register, obtain a UTR, do one self assessment return and de register for a one-off short period of self-employment. HMRC don’t need the hassle and the approach that I described can suffice - especially if the tax is paid.

Strictly, of course, HMRC is perfectly entitled to insist upon the correct procedures but can be flexible …. depending on who deals with the issue. This flexibility is not new as evidenced by some on this forum thread (final poster).

https://www.accountingweb.co.uk/any-answers/very-short-period-of-self-employment

ajs92

Thanks for all the help everyone, really appreciated! Yes it was just a one off period that he freelanced, and has been in employment ever since.