Freelancers’ Questions: Must I HMRC-register if my income is under £1,000?

Freelancer’s Question: I'm a UK national living in Turkey. I've started doing small freelance jobs, and occasionally need to invoice clients for payment into the UK via PayPal.

Freelancers’ Questions: Must I HMRC-register if my income is under £1,000?

My work is minimal. So I can't see my annual income going above £1,000 for the moment.
If the work is less than £1,000 annually, do I still need to register with HMRC as self-employed, and do tax self-assessments, to be a legitimate UK trader? And in the instance that things go very well, and my sales surge, at what point would I need to register?

Expert’s Answer: As you live in Turkey, I assume you are a tax resident there. You may also be tax resident in the UK.

If you are tax resident in both the UK and Turkey, there are rules in the Double Tax Treaty (DTT) to determine whether you are deemed a tax resident of the UK, or Turkey, for the purposes of the DTT. 

If you're tax resident in Turkey...

The main determining factor is whether you have a permanent home available to you in one country and not the other. From your question, it seems likely you have such a home only in Turkey and so the DTT would deem you tax resident in Turkey.

Therefore for the remainder of my answer, I will assume that you are either only resident in Turkey, or that the DTT would deem you tax resident in Turkey.

Why your income still won't be taxable

Given the above assumptions, if none of the work is performed in the UK, then it is not subject to UK tax. It would not matter how much your self-employed income grew to -- it still wouldn’t be taxable in the UK.

Even if the work is performed in the UK, it is still not subject to UK tax unless you have a permanent establishment in the UK through which the services are provided, or you are present in the UK for 183 days or more, in a 12 month period.

UK-based? Then check the 183-day rule

If you do have a permanent establishment or are in the UK for more than 183 days in 12 months, then only so much of the income as is generated in the UK is taxable in the UK. If your income from this is less than £1,000, then you do not need to declare it to HMRC (thanks to HMRC’s £1,000 Trading and Property Allowance for taxpayers), unless you are already registered for Self-Assessment in the UK.

Penultimately, you may be entitled to the UK’s personal ‘tax-free’ allowance (currently £12,500 a year), for example, if you hold a British passport. This means you can earn income in the UK each year, up to this amount, without paying UK tax.

Get in touch with HMRC

Finally, let’s assume the most taxing scenario -- if your income is taxable in the UK, based on the above and is greater than £1,000, you have until October 5th following the end of the tax year to register with HMRC for self-assessment. In fact, if you are entitled to the personal allowance of £12,500 and your UK taxable income is likely to remain well below this figure, I would contact HMRC well ahead of October 5th and ask whether they would grant you an exemption from registering for self-assessment. The good news is that any tax you do suffer in the UK on that income will be offset against the Turkish tax on that income, under the DTT.  

The expert was Graham Jenner, founder of Jenner& Co, a tax and accountancy advisory specialising in freelancers, sole traders and the self-employed.