The Low Incomes Tax Reform Group (LITRG) has urged individuals who began freelance or ‘gig’ work in the 2016/17 tax year to register for self-assessment with HM Revenue and Customs (HMRC) by 5th October or face financial penalties.
Self-employed professionals must notify HMRC of any new source of income, such as revenue from a new trade or business, by 5th October in the tax year following that in which the new revenue began.
The LITRG says this warning includes those gig economy workers who take on a variety of different jobs, increasingly via online platforms such as the much-talked-about Uber.
The group fears the irregular and ‘on demand’ nature of some gig work may not even register in individuals’ minds that it is taxable. They may also be unaware that, even if the level of income from their new work is below the levels for income tax or National Insurance, they must still report this new income to HMRC via a self-assessment tax return.
"If a person’s activity is regular, organised and is done with a view to generating a profit, then this will put them within the realms of self-employment and the UK’s complex self-assessment tax return system.
"There is a real risk of penalties for failure to notify HMRC, which are based on the tax that could potentially be lost as a result of the failure to notify on time.
"Where the 5th October deadline is missed, a person should still register [with HMRC} as soon as they find out they should. As long as a tax return is submitted and any tax due is paid on time (normally by the following 31st January), there will be no potential lost tax revenue and thus no penalty to pay.”
This warning coincides with HMRC’s plans to provide simple assessment notices to individuals outlining their income tax or capital gains tax liabilities without first being required to complete a self-assessment tax return.
It’s another move towards HMRC’s overall Making Tax Digital system, designed to handle straightforward tax cases where the tax authority already has the required figures from the taxpayer or third parties by submitting a pre-calculated notice of tax owed.
Chas Roy-Chowdhury, head of tax, Association of Chartered Certified Accountants (ACCA), said: “This is a welcome step forward for improving the efficiency and ease of the tax system, but I do advise those who receive a simple assessment notice to check their details and calculations.
"While the simple assessment notice is likely to be accurate for a taxpayer with one stable income, it is not yet clear how accurate these notices will be for taxpayers who need to take deductions, secondary income sources or other factors, such as pensions or gift aid, into account.”
Your local TaxAssist Accountant can help guide you through the new simple assessment notice initiative if you want a highly-qualified pair of eyes to run through your financial affairs. Taxpayers have just 60 days to raise queries and submit evidence for figures to be amended to any simple assessment notice, so it’s important that you act fast and let your nearest TaxAssist expert to help get your tax liabilities correct.
For an initial consultation, please don’t hesitate to call our friendly, experienced team today on 0800 0523 555 or drop us a line using our online contact form.