Tag: second income

The Second Income Campaign re-visited! what is your side hustle?

Second Jobs or as the Americans call them Side Hustles are very popular, here is a website focused on them

100+ Side Hustle Ideas to Make $500+ in Your Spare Time

Almost a third of British workers run some kind of creative business outside their main job contributing an estimated £15bn to the UK economy, according to research from Moo.com. One in ten part-time creative entrepreneurs plans to leave their job to focus on their business full-time within the next year. However, 60% said it was their passion for the business, and not making money, that motivated them. The most popular part-time creative ventures are in food and cooking, gardening, photography and knitting. (According to Law Donut)

So why are micro businesses taking off:

  1. You can start off working at home
  2. Your start up costs are low
  3. You can do it part time when it suits you
  4. With wages frozen and costs rising it can provide a useful additional income
  5. Its easy to be price competitive with low overheads
  6. The Internet makes it easy to sell your goods and services
  7. Your social capital can be used to generate sales ie use your contacts and connections
  8. There could be tax advantages – employees generally pay more tax than sole traders
  9. Some clients prefer the personal touch
  10. It could be start of something big

HMRC orginally launched their campaign in April 2014 and have updated it on 12th June 2017.

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

Examples could include:

  • fees from consultancy or other services such as public speaking or providing training
  • payment for organising parties and events or providing entertainment
  • income from activities such as taxi driving, hairdressing, providing fitness training or landscape gardening
  • profits from spare time activities such as making and selling craft items
  • profits from buying and selling goods, for example regular market stalls, boot sales etc

 

The criteria used to assess if an activity is a hobby or a business are:

  • The size and commerciality of the activity.
  • The frequency of the activity and transactions
  • The application of business principles.
  • Whether there is a genuine profit motive.
  • The amount of time devoted to the activities.
  • The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).

To take part in the Second Incomes Campaign you should:

  • tell HMRC that you want to take part in the Second Incomes Campaign (Notify)
  • tell HMRC about all income, gains, tax and duties you’ve not previously told them about (Disclose)
  • make a formal offer
  • pay what you owe
  • help HMRC as much as you can if they ask you for more information

To benefit from the reduced penalties offered HMRC will take account of the level to which you have helped them and the accuracy of the information you provided.

https://www.gov.uk/government/publications/second-incomes-campaign-your-guide-to-making-a-disclosure/second-incomes-campaign-your-guide-to-making-a-disclosure

steve@bicknells.net

Is it a business or a hobby?

Fotolia_45741373_XS cash

The criteria used to assess if an activity is a hobby or a business are:

  • The size and commerciality of the activity.
  • The frequency of the activity and transactions
  • The application of business principles.
  • Whether there is a genuine profit motive.
  • The amount of time devoted to the activities.
  • The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).

HMRC have some great examples to help you decided, for example

Gail is a full-time employee working for a stationery company. She pays her PAYE tax on this employment every month.

In her free time Gail makes cushions and uses most of them in her home. Occasionally she sells them to friends and work colleagues for an amount that just covers the cost of materials of £15. Sometimes she makes a loss. Any money she does make goes towards her holiday fund.

She decides to make extra cash by selling cushions on an Internet auction site and starts auctioning three or four to see how they go. They all sell for more than £50, a profit of at least £35 each.

She uses this money to buy more materials and within a month she is selling around ten cushions a week, always at a profit, and is considering setting up her own website.

Gail’s initial sales of cushions to friends are not classed as trading. It lacks commerciality and she does not set out to make a profit. The occasional sales are a by-product of her hobby. Once she begins to auction her cushions, she has moved into the realms of commerciality.

She is systematically selling her goods to make a profit. She will need to inform HMRC about her trade, and keep records of all her transactions. On the level of sales shown in the example the potential turnover of around £26,000 is well below the VAT annual threshold so Gail does not need to register for VAT.

Last year HMRC sent 14,000 letters to traders suspected of running a business and failing to declare this on their tax returns.

Of these, 1,000 letters were sent to people where the taxman has already identified a shortfall on their self-assessment forms.

Some of those targeted make as little as £100 profit online.

HMRC have extensive guidance at https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20050

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

Under the new allowances, from April next year individuals with property or trading income won’t need to declare or pay tax on the first £1,000 they earn from each source per year. Should they earn more than that amount they will have to declare it, but they can still take advantage of the allowance.

Should you be declaring your Hobby (Business) to HMRC?

steve@bicknells.net

 

Do you have a Second Income? own up now!

sholder bags

On the 9th April 2014 HMRC launched the Second Income Campaign….

A second income could come from:

  • consultancy fees, eg for providing training
  • organising parties and events
  • providing services like taxi driving, hairdressing or fitness training
  • making and selling craft items
  • buying and selling goods, eg at market stalls or car boot sales

You need to tell HM Revenue and Customs (HMRC) if your additional income hasn’t been taxed through either:

  • your main job
  • another Pay As You Earn (PAYE) scheme
  • Self Assessment

This is called a ‘voluntary disclosure’. To get the best possible terms you need to tell HMRC that you want to take part in the campaign.

You’ll have 4 months to calculate and pay what you owe.

You can find out about the campaign and how to make a disclosure here

The criteria used to assess if an activity is a hobby or a business are:

  • The size and commerciality of the activity.
  • The frequency of the activity and transactions
  • The application of business principles.
  • Whether there is a genuine profit motive.
  • The amount of time devoted to the activities.
  • The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).

If you have a Second Income its better to disclose it now rather than wait till HMRC find you.

steve@bicknells.net