DECLARING EXTRA INCOME – A USEFUL GUIDE

When I tell people I am self-employed and make money from home, one of the first things I get asked after “What do you do?” is “how do you go about paying tax”?

I think the thought of sorting it all out even puts some people off making extra money, which is absolutely crazy!

Today I am going to provide you with a basic, useful guide of how to go about declaring extra income.

Whether you are thinking about being self-employed or earning extra income on top of your earnings from your job, you must declare your income.

There are a few exceptions to this, such as, if you are making a Tax Free Income from Matched Betting. Or, if you are not making any money from your side hustle, ie if you blog as a hobby rather than to make money. Generally, however, if you are making extra money, you need to register as self-employed.

Registering as self-employed is not complicated at all and once you have done it, all you need to do is complete a self-assessment on-line once a year. If you keep sufficient records of your earnings then filling out the tax return only takes a few hours. I set a day aside each year to focus on it, then it’s done!

How Soon Do I Have to Register?

If you are starting to make extra money around your job or setting up as self-employed then you have plenty of time to register but the sooner the better so you don’t forget! If you register late you may be liable to pay a penalty.

The very latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed.

So, as an example, if you started your business in July 2018, you would need to register with HMRC by 5 October 2019.

The tax year runs from 6 April to 5 April the following year.

You can register here on the HMRC website. It doesn’t matter whether you are a business or an individual, the registration is basically the same. If you don’t have a business name as such you can just use your own name. Just go through and read and answer all the questions to the best of your knowledge.

When you have registered you will receive your UTR (Unique Taxpayer Reference) in the post. You can then use it to register to complete your self-assessment online. It is important that you keep your UTR safe as you will need it to log into your account.

Do I Need to Register If I Only Earn a Small Amount?

Simply yes! It doesn’t matter how little you earn, as long as you are making some money you must declare it. When you submit your tax return it is then up to HMRC to calculate whether you need to pay any tax or not.

How Much Tax Will I Need to Pay?

For the 2018/19 tax year, the standard personal allowance is £11,850 and for the 2019/20 tax year, the standard personal allowance will be £12,500. This is the same whether you are employed or self-employed. Therefore any extra income earned over this amount is what you will pay tax on.

Remember that when you are self-employed, you only pay tax on your profits, not your earnings. It is therefore important, and in your best interest, to keep all records and receipts for your expenses.

Anything you purchase for your business or to make extra money such as a laptop, printer, office furniture, stationery, etc can all be offset against your profit.

What If I Find it All Too Complicated?

Then I know how you feel! This is not my favourite part of earning extra money but it’s not as difficult as it may seem at first.

The HMRC website is unfortunately quite confusing in places but they have a great helpline if you need to speak to somebody for help or clarification when registering or when filling out your tax return on-line. The number to call is 0300 200 3504.

I am not a financial expert or an accountant but if you have been concerned about declaring extra income, I hope you found this guide useful. If you have any concerns or queries, contact HMRC direct on the above number.

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Declaring Extra Income – A Useful Guide