The sideways hustle economy has boomed during the pandemic, with an estimated value of £346billion currently. With all that wealth, secondary scammers have been warned not to let their tax liabilities outpace their success, as tax experts share their top 10 tips.
Many Brits quitting full-time jobs, or simply taking their sources of income more seriously, are unsure of where their tax scramble stands.
It was found that around 17% of secondary scammers did not declare their income or chose to conceal their income from HMRC.
Whether intentional or out of sheer ignorance, the consequences can be deadly for small businesses and burgeoning hustles.
That’s why TaxScouts has launched its free eBook, Tax 101: Surviving the Hustle Economy and has shared its top 10 tips exclusively with Express.co.uk.
Know when to pay
Outside of regular employment, everyone has an extra £1,000 earnings allowance, so if anyone’s hustle has done less than that, they don’t have to worry about HMRC.
However, scammers who earn this allowance in a tax year will need to report it and submit a self-assessment tax return.
TaxScouts recommended opening a business account to “avoid getting caught at tax time.”
They noted, “Having separate personal and business bank accounts can help you manage your finances more efficiently and make it easier to maintain accurate business records in general, saving you more time and effort when it comes to long-term accounting!”
Get tax refunds sooner
Taxation tends to be a topic that people try to put off until the very last minute, but TaxScouts advised against this and pointed out, “You don’t actually have to pay your tax bill when you file your tax return. .
“You can actually file and pay anytime from April 6, the start of the new tax year, with January 31 of the following year as the deadline to pay your tax bills – later and you’ll start incurring penalties.”
DO NOT MISS :
Filing a tax return will generate the amount of tax one owes or the refund one is owed, meaning the sooner it is submitted, the sooner scammers can receive their refunds, check how much they must or correct any anomaly.
TaxScouts recommended putting key tax dates and deadlines on the calendar to avoid accidentally missing them and, therefore, racking up late fees.
They highlighted the following dates to start:
- April 6 – April 5 = the tax year
- October 5 = self-assessment registration deadline
- January 31 = deadline to pay your tax bill online
- July 31 = Deadline for payment on account.
Registration from day one
Accounting and general ledger administration isn’t anyone’s favorite cup of tea, but TaxScouts pointed out that doing it from day one can help scammers avoid “having a mad panic in January.”
Many taxes in the UK provide allowances, but most of them require Britons to use or perform certain tasks in order to benefit from them.
Doing simple research on benefits that might apply to yourself and taking advantage of them “can significantly lower your tax bill or increase your tax refund.”
TaxScouts also pointed out that some allowances are manual, meaning scammers will have to claim them through HMRC.
Scammers should note that while they can claim reimbursement on their tax returns, they cannot claim both expenses and allowances.
This is why keeping receipts is so important that if entrepreneurs can prove that an expense is for their business, they may be tax deductible.
Tax efficiency, not tax evasion
National Insurance rates have risen this month, with the threshold set to rise in June, meaning Britons may find their tax bills aren’t the same as usual.
With this in mind, it has never been more important to be tax efficient, through methods such as claiming tax breaks on money invested in pensions or investing in a startup.
Tax-exempt pension contributions
Saving in a private pension allows Britons to get tax relief, either through their tax return or directly on their paycheck.
These contributions reduce a person’s overall liability for things like National Insurance and income tax, but TaxScouts noted that there is an annual retirement allowance limit of £40,000 a year or 100% of his income.
Contributions that exceed this amount will lose the tax relief.
TaxScouts shared, “If you’re trading crypto as a side business and making money, remember it’s taxable like any other asset.”
Crypto regulations are still slowly being pieced together, so it’s easy to get confused, but holding crypto makes you liable for capital gains tax if sold for profit.