Freelancers, do you need to tell HMRC by Thursday?
You made the January 31st deadline. You even heeded our advice about the July 31st deadline!
But don’t relax just yet, because there’s another cut-off. And it’s probably the least publicised date in the tax calendar of them all -- October 5th, that’s this coming Thursday, writes Amanda Swales, director of Simple Tax.
If you’re new to self-employment, freelancing and operating as a sole trader, you’ll need to take note of this deadline. It’s all because if the make-up of your earnings changed during the 2016/17 tax year (which ended April 5th 2017), rules say you must notify HMRC before Thursday (October 5th), to avoid a potential penalty.
Examples of ‘changes in income’ in the Revenue’s eyes include:
- You are self-employed, or in a business partnership.
- Untaxed income in excess of £2,500 -- perhaps from rental property -- has come your way, or there are multiple streams of income to declare.
- Your earnings exceed £100,000.
- Yours or your partner’s income was over £50,000 and you were in receipt of child benefit.
- You have income from savings of more than £10,000.
- You have income from dividends and shares of more than £10,000.
- You were a trustee of a trust or registered pension scheme.
- You need to pay capital gains tax or claim expenses.
Don’t think any of that applies to you? Well double-check, because as the system currently stands, you may be liable for a penalty should no action be taken by you before the 5th October, and if income is subsequently omitted at Self-Assessment tax return time. This is known as ‘failure to notify.’ More details on this can be found on HMRC’s website here. Worryingly, the penalty can be as high as a 100% of any tax due on undeclared income!
Things may change in November at Autumn Budget 2017, as a HMRC consultation suggested to some that a rethink on penalties was afoot. But for now, we recommend being doubly sure that your Self-Assessment responsibilities are on-record to the appropriate schedule.
If it helps to know, signing up for Self-Assessment is easy, and only takes a few minutes. There’s a form to fill in on the HMRC website, asking for your NI number, residential status and business address, among other information.
Once registration is complete, a UTR (Unique Taxpayer Reference) code will be sent to you within ten working days. This will then be used on every subsequent Self-Assessment. Lastly, some good news. With all these tax deadlines to remember; in January, July and October, HMRC can helpfully remind you of your UTR if you lose or forget it! Good luck freelancers!