HMRC has provided clarity on a tax rule following an enquiry from a taxpayer. The individual, who is considering changing their employment status, reached out to the authority with a question.
They asked: “I have a full time job on which I pay tax, I want to do Uber Eats part time deliveries, do I have to register as sole trader and do I have to fill in tax return if earning less than £1,000 a month for Uber Eats deliveries?”
In response, HMRC outlined the regulations. A representative explained: “The threshold is £1,000 gross in a tax year, so if you earn more than that in a tax year ( resetting on 6 April) then you’d have to register as self employed and file a tax return.” This refers to the trading allowance, which allows individuals to earn up to £1,000 a year in gross income without having to pay National Insurance or income tax.
Gross income is your income before any expenses or taxes are deducted. It’s worth noting that some significant changes to tax policy will be implemented from April, with increased employers National Insurance rates coming in, which will rise from 13.8% to 15%.
Additionally from today (February 17), HMRC will reduce its late payment interest rate from 7.25% to 7%. This is set in line with the Bank of England base rate plus 2.5%, which dropped from 4.75% to 4.5% last week.
More than a million taxpayers missed the self-assessment tax return deadline at the end of January, leaving them liable for a minimum penalty of £100 and interest on their due tax.
Seb Maley, CEO of Qdos, shared his perspective on the current situation: “The story here is that HMRC still charges double the amount of interest than it pays on money owed to taxpayers in the form of refunds and rebates. It’s a huge mismatch and one that taxpayers are bearing the brunt of.”
He added: “Along with being hit by interest rates as high as 7% on outstanding tax bills, the longer a tax bill remains unpaid, the higher the chances are that HMRC will take a closer look and potentially investigate.” Taxpayers should note that HMRC pays interest back at the base rate minus 1%, subject to a 0.5% floor. With current rates, this means the repayments come with interest at just 3.5%.
The Government website explains the thinking behind these differences, stating: “The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.
“The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.”