Self-employed warned over income drops

Date: 12th October 2009

HM Revenue & Customs (HMRC) should always be contacted by the self-employed if a sudden drop in income is suffered.

Writing in the Independent on Sunday, money adviser Liz Barclay pointed out that people's tax bills are often calculated on the assumption that an employee earned steady amounts from year to year.

Ms Barclay pointed out that this was not always the case for self employed sole traders.

She highlighted the case of self-employed reader "JJ", who lost a "big contract" that had provided her with a relatively large amount of money in December 2008, only to be handed a £10,000 tax bill she could not pay in 2009.

HMRC calculated this bill not on JJ's actual earnings but on their earnings of previous years.

The expert advised: "As a matter of urgency, call your tax office and explain your predicament. Get your self-assessment forms or accounts completed as soon as possible; work out how much you do owe, and send a cheque for that amount.

"These days the tax man is much more approachable and helpful than they once were."

Ms Barclay has formerly worked at the Citizens Advice Bureau and is currently a presenter of You and Yours on BBC Radio 4.