PAYE Income Tax and Additional Earnings

4richa4pora

A family member pays income tax as PAYE for his full time employment.

He has the option of doing a one off piece of work 'privately', which would generate a one off payment of £600 gross during this tax year.

This £600 would not put him in a higher tax bracket.

How should he pay tax on this £600?

Ideally he would like to notify the Inland Revenue of this £600 on receipt, and then make a one off payment to them for the tax due by cheque.

Is this possible?

Or will he have to fill in self assessment forms etc? If so, he may decide to not do the work.

Any legal alternatives welcome.

fengirl_2

The only way to declare this money is through self assessment. He only needs to wait until the end of the tax year in which the money is earnt and ask for an SA form - he can get the simplified version, fill it in and pay the tax by 31 Jan of the following year. Make sure he tells HMRC when he submits the SA that this was a one-off.

4richa4pora

Thanks for the info fengirl and for the tip about stressing that this is a one off payment!

Mikeyorks

4richa4pora wrote: »

Or will he have to fill in self assessment forms etc? If so, he may decide to not do the work.

There is a potentially valid 'work around' to the SA Return. If he uses a short cut of the P810 procedure :

http://www.hmrc.gov.uk/pensioners/endoftaxyear.htm#3
http://www.hmrc.gov.uk/sa/faqs-sa-returns.htm#q6

(ignore the 'pensioners' bit in the first link .... it applies to a lot of people turfed out of SA, because their affairs are reasonably straightforward)

.......by writing to his HMRC PAYE office immediately after the end of the tax year (although might be best to wait until he has his P60 .. and enclose a copy) in which he is paid the £600 - and declaring it (along with formal invoice etc). And asking for a payslip on which to make a Voluntary Direct Payment (likely to be £120 if 08-09). On receipt of the payslip he should pay the money to the Accounts Office and they will advise the 'District' side of the payment. Who, in turn, should make a formal PAYE assessment showing the underpayment created by the additional £600 received .... and the satisfaction thereof from the £120 Voluntary Direct Payment.


http://www.hmrc.gov.uk/manuals/pommanual/PAYE90011.htm

The P810 normally results in an underpayment being 'coded out' in order the money is collected throughout the following year ... which I assume he does not wish? And the other reason for writing (rather than invite HMRC to issue a P810) ..... is that P810s tend to 'languish' in HMRC piles. As I discovered when I've used one to claim a refund due on a CITR account.

As a bit of innovation isn't the strong point of all HMRC offices - might be best to ring his PAYE office now and check they'll accept a P810 equivalent by letter? The only valid objection is that the £600 isn't from his PAYE 'source'. But as they regularly add 'other income' to PAYE for expediency ... it's worth trying. As the SA 'short return' isn't generally admissible until at least one full Return has been made.