Business

Avoiding tax return pitfalls for extra work

Paper tax returns must be with HMRC by October 31 of following tax year
Paper tax returns must be with HMRC by October 31 of following tax year Paper tax returns must be with HMRC by October 31 of following tax year

QUESTION: I am working as a teacher in a local school, however, I am also doing some private tuition at the weekends. Obviously all my earnings from the school are taxed at source under the PAYE system, however, can you tell me what my obligations are with regards to registering with HMRC and filing a tax return for the income I have from my private teaching.

ANSWER: The first step is to register as self-employed with HMRC. You can register as self-employed either online at www.gov.uk, by telephone on 0300 200 3504 or by completing form CWF1 and returning this form to HMRC by post. It can take 10 working days to complete the registration process so you should ensure that you have registered well before the tax return filing deadline.

When you register as self-employed you will be issued with a Unique Taxpayer Reference which will be used in all communications with HMRC.

Ideally, it is advisable to register for self-employment as soon as possible after you start to trade and at the latest you should register by October 5 in your second tax year. For example, if you started working as a sole trader between April 2014 and March 2015 you should register before 5 October 2015.

You will be required to submit your first tax return for the year April 6 2014 to April 5 2015 on or before January 31 2016 if you submit the tax return online or by October 31 2015 if you are submitting a paper return.

As well as the taxable profits from your private teaching you will also need to declare details of income from all other sources on your income tax return. For example, you will have to include details of your existing employment income, any bank and building society interest you have received during the year, dividend receipts and rental income.

A comprehensive overview of the income which must be declared on your tax return will be highlighted on the return and also on the Inland Revenue website and tax return help sheets. As a self-employed person you will now be required to pay both class 4 national insurance contributions and class 2 national insurance contributions. HMRC will send you details of when and how to pay your national insurance contributions once you have registered as self-employed.

It is advisable to seek professional advice when you are registering for self-employment to ensure that you are registered for all the relevant taxes and to avoid penalties for late submission of the relevant forms. Professional advice should also be sought to ensure that you are claiming the tax deductible expenses which you are entitled to and ensuring that your tax liabilities are kept to a minimum.

:: Feargal McCormack (f.mccormack@pkffpm.com) is managing partner of PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.