Not Declaring? Not an Option. HMRC cracks down on “Secret” Second Incomes
In the Royal Bank of Scotland’s January Enterprise Tracker Survey it was revealed that 20% of adults can be described as ‘hidden entrepreneurs’. According to RBS’ research 40% of adults have a hobby that could provide them with a second income and nearly half of these treat this hobby as a way of picking up extra cash or even hoping that one day it will become a fully-fledged business. These people who are earning from their hobby are this ‘hidden entrepreneur’ group and they are at risk from being targeted the HMRC’s Second Incomes Campaign.
If you earn any kind of self-employed income, you have to declare it. It doesn’t matter if it’s £50 or £50,000, it is supplementary income to what you earn in your job and therefore you are obliged to declare it for tax purposes.
The HMRC’s Second Incomes Campaign specifically targets people like those found the RBS survey. You are considered to have a second income by the HMRC if you have are employed and paid wages through PAYE as your main job but also earn extra money from activities such as the following:
- Making and selling crafts
- Buying and selling goods such as at market stalls or boot sales (regularly)
- Taxi driving, hair dressing, personal training or landscape gardening (in addition to a ‘main job’)
- Organising events and parties or providing entertainment at a cost
- Any kind of consultancy service or training service
Are you declaring your Second Income?
The Second Incomes Campaign is something that the HMRC runs regularly and often the focus in particularly on different groups, with previous focus falling on eBay sellers for example. These campaigns are designed to give people who have a second income a chance to fix things and the opportunity to declare it now. The HMRC give those with a second income the opportunity to avoid fines and penalties, although you must still pay any tax owed and the HMRC are also less likely to take any criminal action against you, as long as you act now.
If you make the decision to declare your second income voluntarily then you will usually have your declaration limited to six years but if the HMRC were to find out about your second income without you letting them know they have the right to go through your tax affairs spanning the last 20 years. It really pays to make sure you’re honest and declare as soon as you possibly can.
How do you declare your Second Income?
The easiest way to fix this situation before it becomes a problem is to register as self-employed as soon as possible. Our article on self-employment registration tells you all you need to know and the sooner you register the sooner you can breathe a sigh of relief and avoid any more worry about the HMRC potentially knocking on your door. The HMRC are regularly carrying out these Second Income Campaigns to discover the ‘hidden entrepreneurs’ out there so don’t be one of them!
Image credit: HMRC Flickr