Keep It Legit

There are a few things to consider when trying to earn a bit extra. There might be tax to pay. It may affect any benefit payments. Is it something a landlord or local council need to know about?

Not all the State’s systems are working properly when it comes to people getting off their bums to make a bit extra. That shouldn’t be a reason not to try, though, especially when we’re struggling to make ends meet.

WHEN TAX GETS TAXING

Everyone in the UK should be paying tax on any income over £11,850 and declaring what we earn to HMRC. This can be very tricky and some people give up trying. Simply, if we’re making money outside of formal employment, we ought to register as self-employed. HMRC then give us a Unique Tax Reference and we should file a return each year by 31st January (for the previous tax year).

If our total income does not exceed £11,850, no tax will be payable. If it does, it sounds like it’s a real business, and the online form will calculate what we owe. The form looks daunting but there are loads of sections that we can skip through if they don’t apply. Ask for help, if needed. And look at the form long before the deadline.

TOPPING UP BENEFIT

It getting harder to set up in business while on benefits. Campaigners have spotted that with Universal Credit, as it stands*, after one year’s trading, anyone who’s self-employed will be assumed to earn minimum wage x 35 hours per week x 52 weeks a year. This is highly unlikely for many people setting out in business, let alone those just making a little extra.

For those making a little extra dog-walking or baby-sitting, for example, Universal Credit might say we’re not really self-employed. It makes a strange assumption that if we’re self-employed, we must running a business that earns enough. Otherwise it’s just a hobby. We say, what’s wrong with that?

It may become clearer how we can declare earning a bit even when it’s not enough to live on. Meanwhile many people feel they are forced into a ‘grey economy’ where the new system does not allow them to be totally honest.

The State struggles to distinguish between making twenty quid at a car boot sale and real earnings. Is it a business venture if we make a tenner selling veg we grew in our back garden? It’s a grey area but one we should be aware of. The rules could get clearer.

THE SMALL PRINT

If we’re a tenant and making money working from home, or making money renting out a room or parking space, it’s important to check the tenancy agreement. Councils and housing associations, if renting from them, may be able to offer advice on this too.

Some business activity might also need a licence from the council or other body. For example, making food from home and selling it online through Just Eat might still fall under rules on food hygiene.

*Correct as at Summer 2018

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