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For a while my, erm, friend's wife has been doing ironing and cleaning for a few different friends. It's just a few hours and isn't regular work so she's massively below the minimum threshold for paying tax. As such nothing's been declared to the tax man.
She still has student loans that she defers each year and the student loans co want to see bank statements to see her child benefit payments, these statements also show ironing and cleaning income.
As such she now needs to tell the student loans co about the income and is worried that they might inform the tax office too...
Does she really need to be registered for such minimal income? Are there likely to be penalties for not registering sooner? What's the best way forward?
Firstly I'm not an expert, just a tax paying freelancer so take all this with s pinch. You should fill out a said assessment even if you earn below the threshold. The hmrc website says [i]You must register for Self Assessment with HMRC as soon as you can after starting your business[/i] which is pretty vague but sooner would be better than later. You've got until the end of this year to fill out last year's. If you have very little income it will only take 10 mins so not really worth avoiding.
Why on earth is [s]your wife[/s] your friend's wife putting the cash in the bank? surely just keep it in the hand and use it instead of going to the cashpoint? A technique beloved of builders, plumbers and chinese takeaways the world over...
Thanks for the comments.
She's been getting paid by bank transfer, I, erm, my friend was unaware of this so believe me that question has been asked.............
maybe you, sorry your mate, has been putting money in her account to spend on household stuff?
But in all seriousness you need to declare self employed within the time limit for submitting a tax return for the year you were paid in. But it is best to do it as soon as possible. I believe they made this rule a bit more lenient as it was previously a shorter period. There is mention of a £100 fine but I think it rarely gets/got actioned and now I think there is a fine if there is money owed or as a percentage of money owed which in this case will be zero. ie they made it a lot fairer by not fining people who don't own anything. The problem arises if this has gone on for a couple of years as she will have missed a tax return.
She will also need to pay self employment NI payments but if she is below a certain threshold (about £5k) then she can fill out a form to be exempt from those.
Unfortunately even though she is well below the tax and NI thresholds she still needs to go through the process of a self assessment every year.
Might be worth spending a bit of money on a freelance accountant to sort it all out. It won't cost much if you have all the records there in a nice spreadsheet for them to go through.
So [s]you've[/s] your friends have been actively neglecting to declare income, thinking it was so insignificant it wouldn't matter, but now there's a chance [s]you'll[/s] they'll get found out [s]you[/s] they are sweating it?
I'm sure it'll be fine though 😉
It seems the first bank transfer was in August last year so if I understand correctly she should be in time to declare for the 2012-2013 tax year...
To be honest, any accountant costs are going to make her earnings totally non-worthwhile... It really is that small an amount.
Bloody bank transfers... Erm, is what I imagine my friend is saying...
I doubt the SLC will tell the tax man.
they don't know their arse from their elbow.
Self assessments are really easy to complete - and yes, you are in time
August - you will be fine.
tbh you should be able to do the self assessment easily yourself. I get an accountant to do mine as I buy lots of equipment and it's my main income. I use a freelance accountant who is fantastic and doesnt charge me much while I am starting out.
I never send my bank statements to defer my student loans. Just send the child benefit award letter , or a copy of, that should be fine.
Remember that when your friend fills in the self assessment besides putting in earnings you also put in any expenses.
You wouldn't need an accountant for such a simple situation.
I'm not certain but its probably just the short tax return that your friend would need.
wasn't a friend repaying your other friend a small loan by regular bank transfers 😉
You should register as self employed as you are also liable for NIC as well. There can be a fine if you do not.
Cash would have been simpler!
Thanks for the pointers. I, erm, he thought cash was what was happening... Interesting to know that she doesn't have to send the actual statement and can use the child benefit letter instead.
After she packed in work to be a mum (6-7 years ago) I've, erm, he's no idea what's happened with regards to NI (presumably the state pays for a stay-at-home-mum but does it carry on indefinitely?) so we, ahem they need to have a proper look into what she needs to do.
I've just found the Pension statement form on HMRC so [s]we[/s] they can hopefully find out from that whether she's underpaid NI. Then [s]we[/s] they can work out what pension she'll be entitled to if she carries on as is or whether to make up the shortfall.
The goodie-two-shoes part of [s]me[/s] them will be happier if it's above board (even if it is largely a pointless pen-pushing exercise).
Thanks again.
You only have to pay the additional NIC payments if you are self employed.
[i]After she packed in work to be a mum (6-7 years ago) I've, erm, he's no idea what's happened with regards to NI (presumably the state pays for a stay-at-home-mum but does it carry on indefinitely?) so we, ahem they need to have a proper look into what she needs to do.[/i]
If you ain receipt of child benefit you are covered for NI periods of not working. Its a little known benefit. Upto age 12 it seems:
http://www.hmrc.gov.uk/childbenefit/start/claiming/protect-pension.htm
And if the amounts are small going into her account and they query it, just say its someone paying back some loaned cash.