For decades those who are self employed and get work cash in hand have been hard to keep track of and make sure that they are paying tax as well as declaring all money that they earn. Now HMRC have had enough and are offering all self employed tradesmen a tax amnesty before the crackdown begins on those who do not declare their earnings.
As we know builders, plumbers, electricians and gas fitters are they most notorious offenders who fail to declare most of their earnings, they still pay tax but only on the small amount that they declare it on. All people who are self employed have to submit their paperwork yearly so that HMRC can calculate how much tax they need to pay, the more you earn the more tax. Those who work for companies do not need to do this as they will pay tax and NI contributions on a monthly basis and not as a lump sum once a year.
It’s important that all people who work pay tax and contribute NI as this is what will pay towards your state pension when you are older. If you do not have sufficient NI contributions then you will not receive the full state pension but in some cases a letter will be sent so you can cover the gap that you didn’t pay so that you don’t miss out. Tax on earnings also play a huge part in the country’s economy it’s what goes towards child benefit and other help you are able to get from the government.
The tax amnesty is up until May 31st after this time HMRC will start investigating those that still refuse to declare earnings and are working cash in hand. Those who are caught will be investigated and asked to pay back all money earnt, fines of 35% or more on the money owed will also have to be paid. If however a tradesman admits to underpaying tax then fines of 10-20 % will apply.
The national chairman of small businesses has said that this will cripple small businesses and that HMRC should have a system in place to help self employed people with better record keeping skills and provide more education on tax obligations.
So if you are self employed and have been under paying tax for the last few years or more, your luck may be about to run out.