Starting a Second Income? It’s Time to Register for Self Assessment!

As the saying goes – there is two certainties in life, death and taxes, so if you are going to be earning a second income, then you will need to be telling the tax man. This is if you are earning more than a £1,000 a year.

So no matter what that second side hustle is, if it is income from outside of your job, then you need to be telling the HMRC. and before you can do that or as you start you need to be registering for self assessment. 

The Importance of Self Assessment for Second Incomes

Normally your income is taxed at source through PAYE pay as you earn, if you are earning any extra money then you need to be thinking, do you need to register for self assessment.

The good news is that it is a very quick and smooth process.

Do I need to register for self assessment?

There are many circumstances that you will need to register for self assessment, namely if you are earning more than £1,000 through any other source of income than a job.

It is the income that triggers the self assessment, not profit.

So if you sold something for £1100 that you bought for £800 you would have to register, obviously your profit is only £300, and that is what you would be taxed on.

But you still need to register.

Other circumstances where you may need to register are the following: 

• you were self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)
• you were a partner in a business partnership
• you earned £100,000 or more

• some COVID-19 grant or support payments
• money from renting out a property
• tips and commission
• income from savings, investments and dividends
• foreign income

Fortunately there is a really easy way to find out if you need to register by following the HMRC TOOL 

Step by step guide to register for self assessment and what will you need

Once you have discovered you need to register for self assessment then this is what you need to do. 

First register for your government gateway user ID so you will be able to log in and complete returns online you can do that here.

Once done you will be able to request your unique taxpayer reference UTR that will be posted out to you

If you haven’t already you will need to get your UTR unique tax reference

Then with both of these you will be able to log in and En roll for self assessment: Once you have your UTR and Government Gateway account, en roll for self assessment online. Provide the required information, including personal details, National Insurance number, and information about your income sources.

Receive your Activation Code: After enrolling, HMRC will send you an Activation Code by mail. This code is required to activate your online self assessment account.

Activate your online account: Once you receive the Activation Code, log in to your Government Gateway account and follow the instructions to activate your online self assessment account using the code provided.

Done you are now all registered the next steps will be to complete your tax returns.

Things to remember

Keep track of your records

If you are going to start earning a second income, you will need to be able to keep track of all of your records, so you pay the right amount of tax, keeping track of all your income and your expenses, will be vitally important.

An excel spreadsheet is good for this, make sure you account for all your expenses that are part of course for your business. Then you will be able to deduct this from your income to see what you own. 

Remember the deadlines

Deadlines are vitally important for self assessment, you need to know when you need to complete your returns and pay your bills. 

So your earnings will be based on the tax year (April to April) so any income from between 6 April 2022 to 5th April 2023 will need to be registered for self assessment by 5th October 2023

Paper tax returns must be completed by 31 October 2023,

Online tax returns by 31 January 2024 and payments made by 31st January 2024

 

Although tax returns can be a daunting process it is not as scary as first seems, and in todays day and age it is necessary for many to be earning a second income. The process is easily walked through and you don’t need any specialist experience to be able to complete.