Friend not paying enough tax

[Llamadramaz]

Hi,
I’m a teacher in a high school. One of my colleagues works full time as a teacher but also does a bit if tutoring on the side. A few of my friends/colleagues friends use her to tutor their kids. She charges £25per hour and people tend to pay her by bank transfer. From what I know she earns about £100-125 per week doing this. I’ve recently found out that she isn’t declaring this to hmrc. She does a self assessment return, but doesn’t declare all of this extra income.

im not about to shop her, but I think she’s skating on thin ice. What’s the likelihood of her being in major trouble?

This would in no way wash if it was looked at and would almost be worse as would look deliberate!

It is unlikely to get picked up but random checks are done. Or people do make reports to the hotline.
She’ll probably get away with it but is a bit silly as would end up paying much more if it does come to light.

Yes, you can definitely use £1,000 of self employed income on top of PAYE.

My DH checked with his accountant when he earned £800 freelance on top of his usual employed earnings. (He has an accountant because he used to be self-employed 100% of the time.)

You still have to declare the extra money you're earning though - especially as the friend already does a self assessment.

🤦‍♀️
no you don’t, not if you’re not already doing an SA return and it’s less than £1000
just need to keep track of it incase it’s ever asked about.

wish people wouldn’t spout wrong information

How do you know she isn't declaring to HMRC?

This is none of your business so a friend would stay out of it.

No you don't. Are you a accountant in tax?

@Heartbreaktuna that's what my accountant told me. All income has to be declared - especially if you're already earning enough to pay tax in your PAYE job.

Maybe he was just being over cautious?

No it isn't although the HMRC tax teachers who mark exams. Teachers should be able to claim this back but this is made very complicated by HMRC. OP - be sad that your friend and so many other teachers have to tutor on the side to make ends meet.

Yes he'll be ensuring he's captured your total taxable income, importantly interest and dividends are not covered by the trading allowance for example. But the 1k trading allowance is gross above paye and requires no SA claim

Many people who work self employed don’t declare parts of their earnings. Builders who request payment in cash. They aren’t declaring that. She won’t get found out

What is she declaring on her self assessment form? Part of the income?

If she is a lovely person, is she doing this in error rather than deliberately?

If you are really worried about her, you could ask her what she would do if someone reported her.
How do you even know this? I know a few people with side hustles, I have no idea if they declare them.

Someone SHOULD report her. Tax evasion is a massive problem costing tens of billions. The "black economy" i.e. undeclared income is the biggest component of the official tax gap.

Given the figures, she's highly unlikely to get into "BIG" trouble. HMRC will just want the tax she should have paid, a bit of interest, and maybe a small amount of penalty if she's open and makes full disclosure when contacted.

That is not true. If you earn less that £1k from self employment, you don't have to declare it, even if you have other income. You don't have to do a self-assessment unless there is some other untaxed income you need to declare. I confirmed this with HMRC only the other day as I am in this exact position.

Why is she doing a tax return if it isn't to declare self employed income? You don't need to submit one as a teacher otherwise. I think she is paying tax on her tutoring income. If she's not paying tax, she's foolish to go shouting about it!

I would just mind your own beeswax, OP.

He must be. When I do a self assessment it basically asks if I have earned over £1k via self employment. I say no, it asks nothing more. I confirmed with HMRC too.

Thanks @foxandbee - this was a few years ago now too.

That makes sense as the £1k allowance only came in relatively recently I think.

@taxguru , so how do you report people?

No need to declare gross income under £1k p.a.

But if gross income is over £1k p.a. you have to declare the total and then claim the £1k as an fixed rate expense deduction (or you have the option to claim valid expenses if higher).

Simple online form is the quickest/easiest way

https://www.gov.uk/report-tax-fraud

I can't get worked up about people "avoiding tax" when it's a few hundred quid here or there.

Let them be.

It's the millionaires, actively avoiding sharing their huge wealth you want to be angry with!

Thanks @taxguru that makes sense!

I can't see how she'd get in trouble unless you or someone else grassed her. How can you be so certain of her tax and business affairs? It's really none of your concern.

It really isn't, I got a letter on Christmas Eve saying I need to do a tax return for 21/22 and 22/23 by December 31st. I am PAYE with a bit from eBay VINTED etc. it was a mad scramble to get it done though. She should be declaring everything she makes.b