HMRC second incomes campaign

HMRC’s second incomes campaign is targeted at employees who have additional income from working for themselves. This latest campaign is an opportunity for taxpayers to disclose any additional tax due on such additional incomes.

The second incomes campaign has no fixed deadline and will be open for some time – unlike similar previous HMRC actions of this kind. There is also no incentive in the form of a reduced penalty for disclosure.

However, voluntary disclosure is always treated more leniently compared with the position where it is HMRC that discovers a taxpayers error. Also, if a taxpayer has made a careless error and submitted their self-assessment tax returns on time, then they need only declare any unpaid tax for up to six previous years – no matter how many years are actually involved. Once the campaign closes, HMRC will use any information it has to come down hard on those it believes have something to disclose but have failed to do so. HMRC can obtain such information by internet research (such as where services are advertised) or from an informer (maybe a disgruntled customer).

HMRC is targeting a wide range of spare-time activities. You might be trading by making and selling craft items, or you could be selling goods from a market stall or at car boot sales. Personal services on which HMRC are focussing include taxi driving, hairdressing, fitness training or landscape gardening. Maybe you receive fees for consultancy or other services such as public speaking or providing training. You might receive payments for organising parties and events or for providing entertainment.

Of course the tax liability might be much lower than expected once allowable expenses are taken into account. For example, public speakers can generally deduct travel expenses from their taxable income, as well as some or all of the cost of equipment they use such as a laptop computer or projector. Even the cost of an office or workspace at home may well be allowable.

Anyone wishing to take advantage of the campaign must initially notify HMRC of their intention, and they then have up to four months to calculate and pay what is owed. Tax calculations covering several years can be quite complicated, especially if claims for tax credits are involved. Also, any other undeclared income, such as investment income or chargeable gains, must be disclosed along with the second income. We will, of course, be happy to help.