TAXING TIMES
HMRC launches new tool to check if YOU need to pay extra tax – check now or risk £100 fine
Scroll to find out if you're at risk of being hit with an unexpected tax bill
HMRC has launched a new tool to help you check if you need to pay extra tax and avoid being slapped with a £100 fine.
If you make money through a side hustle, like selling things online or through content creation, then you may need to report your earnings to the taxman.
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New rules were introduced at the beginning of this year to help the government crackdown on people who earn extra income through various side hustles.
So whether you rent out your tech on Fat Llama, drive for Uber or freelance on Fiverr - your income is now reported directly to HMRC.
This includes millions of people who sell their clothes online too.
Platforms like Depop and Vinted have really soared in popularity in recent years as an easy way to earn some extra money.
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With Christmas just around the corner and sellers likely to list hundreds of unwanted presents, it's important to know whether you could be affected by these rules.
There has been a great deal of confusion around when and how people need to pay tax on extra income through these platforms.
So, to help earners understand their tax obligations, HMRC has created a new online platform for earners to check if they owe cash.
If you aren't clued up, you could be slapped with an unexpected tax bill for not complying with all the necessary tax regulations.
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This year marks the first time that HMRC will directly contact these platforms to record how much money people make by listing services on them.
Dawn Register, a tax dispute resolution partner at accountancy firm BDO said: "This new tool is a useful aid to those who are unsure about whether they will need to file a tax return and how they should declare their earnings and gains.
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"Those who do sell online should be aware of the new rules which require digital platforms to report transaction data from users. Digital platforms have a deadline of 31 January to report this data to HMRC for the calendar year 2024, meaning this will cover at least part of the 2023-24 tax year.
"Those needing to file a return for this period will need to do so before January 31, 2025."
How do I use the new HMRC tool?
You can use the new online tool to check if you need to tell HMRC about the income you receive from using online platforms.
But to do so, you'll need some information about your income.
This could include:
- How much you received, or expect to receive during the tax year
- If you share this income with someone else
- If you have other sources of income you need to declare
When you're telling HMRC about your income, you'll need to report the income for the entire tax year.
This is from April 6, 2023, to April 5 2024.
Some online platforms will show your income for the calendar year, from January 1 to December 31.
If this is the case, you'll need to work out the income for the tax year before using the tool.
How much can I be fined for filing my taxes late?
LATE filing fees are pretty steep, so make sure you get your self-assessment return in before January 31.
According to HMRC, you'll get a £100 fine for failing to file your return a single day after the deadline.
Then, a £10 daily fine applies every day you don't submit your tax return.
This is capped at 90 days - or £900.
So on top of the initial £100 fee, a £1,000 maximum late filing fine applies.
If you're six months late, there's a further £300 fine or 5% of the money you owe - whichever is higher.
That's on top of the daily £10 charges built up so far, so there's no shortcut to a smaller payment once you're late.
And after 12 months, another £300 or 5% fine applies.
Interest is also added on top of this.
If you deliberately haven't filed your tax return, a fine of up to 100% of the tax due could then be sent too.
How do you know if you need to submit a tax return?
Self-assessment is a system HMRC uses to collect income tax.
Tax is usually deducted automatically from wages, pensions and savings, but people and businesses with other incomes must report it in a tax return.
This applies to the following:
- Your income from self-employment was more than £1,000
- Earned more than £2,500 from renting out property
- You or your partner received high-income child benefits and either of you had an annual income of more than £50,000
- Received more than £2,500 in other untaxed income, for example from tips or commission
- Are limited company directors
- Are shareholders
- Are employees claiming expenses in excess of £2,500
- Have an annual income over £100,000
Before you can complete and submit your tax return, you'll need to have a so-called unique taxpayer reference (UTR) and activation code from HMRC.
This can take a while to receive, so if it's the first time you're completing a self-assessment, make sure you register online immediately and ask HMRC for advice.
To sign in or register visit the "Self Assessment tax return" section of HMRC's website.
If you've already signed up for self-assessment, you can find your UTR in relevant letters and emails from HMRC.
HMRC accepts your payment on the date you make it, not the date it reaches its account - including on weekends.
The deadline for filing your self-assessment tax return by post is October 31.
If you miss the deadline by up to three months you will be charged a £100 penalty.
If you miss the deadline by over three months you will be charged more on top of this.
But don't worry as if you don't send your paper form on time, you can fill out your tax return online.
You have to do by January 31, 2025.
If you need to change your tax return after you've filed it, you can do so within 12 months of the original deadline or you can write to HMRC for any changes after that.
Filling in your tax return can seem daunting, but with our step-by-step guide, you'll have it sorted in no time.
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Meanwhile, people are only just realising that their side hustle could land them with an unexpected bill.
Plus, here is the full list of jobs at risk of paying higher rate tax – and it’s not the professions you think.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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