Self-employed people are required to notify HMRC of a new source of income, such as receipts from a trade or business, by 5 October in the tax year following that in which the new source began. LITRG points out this includes gig economy workers who do a lot of different jobs, often through an online platform such as Uber or TaskRabbit.

LITRG says it is concerned that because of the irregular and often ‘on demand’ nature of gig economy income it may not even occur to people that their activity is taxable. They may also be unaware that where the level of income means that there will be no tax or National Insurance due, HMRC should still be notified as it may still be necessary to complete a tax return.

A failure to notify a new source of income and to complete and submit a tax return when required to do so can lead to financial penalties.

Anne Fairpo, LITRG chair, said: ‘Behind the innovative technology and new language surrounding the “gig economy” lies an old-fashioned taxable source of income. If a person’s activity is regular, organised and is done with a view to generating a profit, then this will put them within the realms of self-employment and the UK's complex self-assessment tax return system.  

‘There is a real risk of penalties for failure to notify HMRC, which are based on the tax that could potentially be lost as a result of the failure to notify on time. Where the 5 October deadline is missed, a person should still register as soon as they find out they should. As long as a tax return is submitted and any tax due is paid on time (normally by the following 31 January), there will be no potential lost tax revenue and thus no penalty to pay.

LITRG is reminding people that even income from one-off jobs or very casual work is taxable. This includes work that does not fall into a category of employment or self-employment, which may be taxable as ‘miscellaneous’ income. In this case the worker still needs to tell HMRC, it is just that HMRC may be able to collect any tax owed on it through adjusting their PAYE tax code instead (if they have one). 

Reporting the income as ‘miscellaneous’ will mean that the person cannot pay Class 2 National Insurance. Unless enough NIC or NIC credits will be put on their record any other way to bank the year as ‘qualifying’, they may wish to consider making voluntary Class 3 NIC contributions. LITRG warns these are quite expensive at £14.10 a week, so before committing themselves, they should consider if it is necessary to make them taking account of how many qualifying years they already have worked and their future potential to make up any gaps.

This week also marks the start of HMRC’s rollout of simple assessment notices, which notify individuals of their income tax or capital gains tax liability without the individual first being required to complete a self assessment tax return. The move forms part of the Making Tax Digital initiative and is designed to handle straightforward cases where HMRC has all the necessary information from the taxpayer or third parties by providing a pre-calculated notice of tax due.

Chas Roy-Chowdhury, head of tax at ACCA, said: ‘This is a welcome step forward for improving the efficiency and ease of the tax system, but I do advise those who receive a simple assessment notice to check their details and calculations.

‘While the simple assessment notice is likely to be accurate for a taxpayer with one stable income, it is not yet clear how accurate these notices will be for taxpayers who need to take deductions, secondary income sources or other factors, such as pensions or gift aid, into account.

‘One the simple assessment is received, taxpayers have just 60 days to raise a query and provide evidence for the figures to be amended. I strongly recommend that anyone receiving a simple assessment notice engages early.’

Report by Pat Sweet