Business Battle-axe Amanda Vigar, managing partner of Holmfirth-based accountants V&A Bell Brown LLP, is urging tax payers to ensure they declare all income to HMRC.
“Grey area” income, that people may overlook, includes, for example, rental income, earnings from self-employment, savings income for higher rate taxpayers, and untaxed income like regular eBay sales of more than just your surplus personal possessions or casual freelance earnings.
Amanda said: “Many people are unaware of the kinds of things they need to declare while others may be under the impression that their undeclared income is too small to mention.
“If you own a rental property, such as buy-to-let, you have to declare the income from your tenants. You can offset your mortgage interest payments against the rent, but you don’t get tax relief on capital repayments on the debt.
“You also may be able to claim wear and tear and repairs against your rental income if it is let furnished
“Although you don’t have to pay any tax on the profit from selling your own home, you may have to pay capital gains tax on any second home, such as a holiday home or rental property. But don’t be tempted to hide income or capital gains from the taxman.”
On the other hand, there are tax deductible expenses that people often overlook such as when they have to have to pay for protective work clothes, uniforms and tools or have to cover the cost of repairing, cleaning or replacing specialist work clothing including protective gear.
HMRC’s super-powerful £45million Connect computer system gathers information from a vast range of sources to find discrepancies.
The Revenue has recently launched crackdowns on buy-to-let landlords, part-time taxi drivers, car boot traders, offshore bank accounts and teachers who do occasional tutoring on the side.
Amanda added: “Although people can sell surplus bits and pieces on eBay without paying tax on their gains, it becomes a different matter if it turns into a regular income stream.
“It’s important that taxpayers are aware of this and ensure that they include any income not subject to PAYE on their Self-Assessment Tax Returns.”
Most taxpayers in the UK are taxed at source and so do not need to complete a Self Assessment Tax Return. “Taxed at source” means that the money taxpayer’s receive has already had tax taken off, such as the wages they get from their employer when paid under the Pay As You Earn (PAYE) system, or UK bank interest taxed at source.
People who have income that has not been taxed at source, or not taxed at the correct rate, and on which tax is due, are required to inform HMRC about the income within six months of the end of the tax year in which the income is received (that is by October 5 following the end of the tax year).
HMRC will then send out a tax return to complete.