Chartered Accountants in York

HM Revenue & Customs (HMRC) has an obligation to ensure we all pay the correct amount of tax. But with many UK taxpayers now earning money from various ‘side hustles’, like eBay, Etsy or Airbnb etc, there’s a growing need to widen the net and review all sources of income. HMRC’s new initiative aims to weed out taxpayers who aren’t fully declaring their income sources , with detailed investigations to prosecute any wrongdoing. So, what does HMRC see as a ‘source of additional income’, and what could the impact be on your tax bill if you fall within the scope of HMRC’s new initiative? How does HMRC know what you’re earning? If you’re making a bit of extra cash on the side, HMRC needs to do a bit of detective work to ascertain how much additional income you’re bringing in. HMRC gathers information from a variety of sources to check whether or not taxpayers are declaring all their income. Although some enquiries and investigations are purely random, over 90% are triggered by a HMRC system called Connect . Connect is a major part of HMRC’s crackdown on undeclared income. Over 3,000 people are employed on Connect, which is a data-matching and risk-analysis platform that enables the cross-referencing of masses of data from HMRC and external sources. What does HMRC now see as an ‘undeclared source of income’? From 2024, HMRC has made it a requirement for digital platforms to report how much income individuals are making through their site. These platforms include eBay, Airbnb and Vinted. Although trading income from these sources has always been taxable, HMRC believes that significant profits are not being declared by some individuals. Will you be affected by HMRC’s new initiative? If you earn £1,000 p.a. or less in additional income, you won’t be affected – if you sell through eBay and similar platforms, HMRC are now much more likely to become aware of this income. If your total sales are below £1,000 per annum then that’s covered by the annual trading allowance , so it can be ignored and HMRC won’t bother you. If you earn more than £1,000 in additional income, you should register as self-employed – if your income is more than £1,000, it’s sensible to register as self-employed. This will mean ensuring that you keep adequate records, so you’re able to report the results of your trading activities to HMRC in a tax return, if required. Where does Connect draw its information on taxpayers? Although HMRC has never revealed all the sources that Connect draws information from, it taps into over 30 databases, including tax returns, bank accounts, social media and even data from sites like Amazon, Google Street View, Zoopla and Rightmove. It’s been quoted that Connect now holds 55 billion items of taxpayer data, so the chances of any undeclared income being tracked down are relatively high. The information from external sources is compared against tax returns and other information. HMRC operatives look for discrepancies across various taxes such as income tax, VAT, and even areas like child benefit claims and can trigger investigations accordingly. HMRC intends to integrate further artificial intelligence (AI) tools into Connect, further enhancing its ability to help close the estimated £30 billion plus tax gap. How can you reduce the chances of a tax investigation? If you want to minimise your chances of being subjected to a lengthy and costly investigation by HMRC, consider the following: Maintain comprehensive records – Good record-keeping is essential, not just for tax purposes but for the health of your business. Voluntary disclosures – if you have undeclared income, consider making a voluntary disclosure to minimise penalties. This will be looked on favourably by HMRC. Talk to us about your income sources and tax planning HMRC is in the process of opening more ‘intelligence led’ enquiries. Working closely with your accountant can help you ensure your records are in order and can even assist if you are selected for an investigation. If you believe you have undeclared income sources, please do get in touch so we can talk through your specific circumstances and how to make a voluntary disclosure.

Outstanding invoices are a frustrating fact of life for business owners – and they’re often left at the bottom of the to-do list. But getting paid is essential – and it’s not as difficult as it seems. It’s all about being polite, but persistent. Start simple Often, an outstanding invoice can be solved with a simple payment request or by resending the invoice. Start there, and you might be surprised by how many long-neglected invoices are paid. Firmer follow-ups If your payment requests are ignored, it’s time for firmer action. Although most people dread making a phone call to ask for payment, it’s actually one of the most effective ways to get an invoice paid. You can also charge a late fee – but this needs to be written into your terms of service before you do the work. Last-ditch options Of course, some clients won’t respond to polite requests. If you have spent months waiting for payment, it’s time to bring in the big guns. This could mean cutting off services until payment is made, or calling in professional debt collectors or lawyers. The bad news: these aggressive options will likely scuttle your relationship with the client. The good news? You might get paid. One more option is doing a credit check before you do business with a client. This can help you reduce the risk of late payments and defaults, and even better, minimise the need for awkward or aggressive follow-ups.  Need help clarifying your terms of service, following up on late invoices or writing off unpaid debt? Get in touch with our team on 01904 787 973 for expert support and guidance. Over the years, we’ve grown into one of the leading accountants in York, expanding our range of accounting services whilst staying true to our core values and our force for good ethos.