The UK’s tax authority, HMRC, has unveiled a new online tool aimed at helping individuals with extra income determine their tax obligations. Whether you’re freelancing, selling online, or renting out property, this tool ensures compliance and helps avoid hefty fines. With January 31, 2025, fast approaching as the deadline for 2023-2024 Self-Assessment tax returns, this tool is a timely resource for taxpayers.
Who Needs to File a Tax Return?
Not everyone is required to file a Self-Assessment tax return. You may need to file if:
- Your income from self-employment exceeds £1,000.
- You earn over £2,500 from renting property.
- You or your partner receive high-income child benefits and earns over £50,000.
- You earn over £2,500 in untaxed income, such as tips or commissions.
- You have an annual income exceeding £100,000.
These guidelines ensure individuals understand when tax declarations are necessary, reducing the risk of errors and penalties. For personalised help, check out our Accounts & Corporation Tax Return services to streamline the filing process.
Why the New Tool is a Game Changer
The new HMRC tool caters especially to individuals earning through side hustles or online platforms. Whether you rent out items on Fat Llama, drive for Uber, or sell on Vinted and Depop, your income is now reported directly to HMRC by these platforms. The tool helps you understand:
- How much of your income needs to be declared.
- Whether you share income sources with others.
- If additional income affects your tax obligations.
With platforms required to report transaction data to HMRC by January 31, 2025, users must ensure their declarations match these records. Need assistance with managing additional income or planning? Explore our Business Tax Planning services for expert advice.
How to Use the Tool
To use the HMRC tool effectively, gather the following:
- Total income for the tax year (April 6, 2023, to April 5, 2024).
- Details of any shared income sources.
- Information on other income streams you may have.
The tool helps calculate whether additional tax is owed and guides you on filing accurately. If you’ve had capital gains from property sales or investments, our Capital Gains Tax services can simplify this aspect of your filing.
Late Filing Penalties: What You Should Know
Filing late can lead to steep penalties, starting with a £100 fine for missing the deadline by a single day. Additional charges include:
- £10 daily fines, capped at £900 for 90 days.
- Further penalties of £300 or 5% of unpaid tax after six months.
- Interest on overdue amounts. Repeated delays or deliberate non-compliance can result in penalties up to 100% of the tax due.
To avoid penalties, get professional assistance with your returns through our Tax Investigation services, which ensure your filings are accurate and timely.
Why Compliance Matters
With Christmas around the corner, many individuals will list items online or take upside hustles for extra income. Understanding tax obligations is crucial to avoid unexpected bills or penalties. The HMRC tool simplifies this process, making it easier for taxpayers to stay compliant. For more complex situations, including inheritance considerations, our Inheritance Tax services provide tailored solutions.
Next Steps for Taxpayers
If this is your first time filing a Self-Assessment, register online at HMRC’s website to obtain your Unique Taxpayer Reference (UTR). For those already registered, ensure your return is filed and payment is made before January 31, 2025. Payments are considered on time when made, even on weekends or holidays.
The new HMRC tool is a step forward in making tax compliance easier for individuals with diverse income streams. Whether you’re a side hustler or freelancer, staying informed and using available resources can save you from costly penalties. For personalised tax assistance, explore our Business Tax Planning or Accounts & Corporation Tax Return services today.
