Tax returns - some questions

[hawkida]

How does tax work in this situation:

I have a regular job and a normal income from it - an annual salary taxed as PAYE.
I do some extra work that brings in a modest income but isn't anything like a primary job and the income is irregular. Let's say it's polishing housebricks on an ad-hoc basis.

I believe I then need to declare this extra income on a tax return.

However, if polishing house bricks were a regular job, I understand I could claim tax exemptions on things like my phone which is needed for contacting potential clients who need bricks polished, and my polishing kit, which is clearly essential. Effectively I'd be declaring myself to be a housebrick polisher.

If housebrick polishing isn't my full time or primary job, though, can I still claim those costs? And how much is reasonable before you get into MP-duckhouse territory? Can I claim on anything peripherally related to the polishing, even if I'd have bought it anyway? What if the items far outweigh the income generated by brick polishing?

Comments

[hawkida.livejournal.com]

Thanks, that's helpful. I am talking UK earnings. If my paye regular job already takes National Insurance then why would I need to register as self-employed for that? Is NI proportional so there'd be extra to pay if my brick polishing was doing well?

[kalorlo.livejournal.com]

Yes, you need to pay NI (class 2) as self-employed even if you have another job, unless your income is under a certain threshold where you can claim the small earnings exemption. Have to fill in a form for that. Class 4 can be due if you've made enough.

You need to register as self-employed and they set up direct debits for the NI.

NI is charged per job, providing you are making over the threshold.

Have a look at http://loisdesigns.blogspot.co.uk/p/tscb-series.html - that's aimed towards small craft businesses, because we have all sorts of complications. If you're not craft, it's probably simpler! No stock-taking :)

If this is for 2012/2013 tax year, tax return due in Jan, then you need to use accruals basis accounting: ie you account for supplies you have bought when you have sold the things made with them. So you can't claim for everything the year you bought it. It's going to change after that so you can choose to use cash basis accounting: ie you account for things when you buy them. Counts for subscriptions too, so you apportion the cost into when you actually receive the magazine, and yearly website charges etc have to be split into financial years.

If the income is royalties that's different so you'd need to look up writerly places for advice.

Claiming costs: for things like phones and internet that also have a personal use factor, you have to base it on what proportion is business use and only claim for that. Making a loss: you can choose to carry it forward to next year against future profits or claim back tax you paid in your PAYE job, so get a rebate. If working from home you can calculate what proportion of everything you are using for business, or there's a basic weekly amount you can use instead that covers everything for 'use of home as office' - forget if it is £3 or £4 this year.

(Not an accountant, but I do my tax return for my craft business while also being employed full-time PAYE).

[kalorlo.livejournal.com]

There *is* also the Casual Earnings box on the tax return: scroll down a bit past halfway here for something on it, but you need to work out whether that's appropriate or whether HMRC will think you are actually self-employed. http://www.etsy.com/forums_thread.php?page=9&thread_id=6710731