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?

given she’s working as s teacher, contributing to society, already paying tax and evidently working hard, I hope she doesn’t get caught. There are multi millionaires getting away with tax fraud who should be dealt with first. Ultimately though it’s none of your business so keep well out of it.

Millions of people evading "a few hundred quid" very quickly totals billions! Hence why the black economy tax evasion segment of the official tax gap is the largest segment!

HMRC can audit anyone at any time - and once they do, they can go back through your accounts for several years, check your income and where it comes from, and insist you pay back taxes, interest and penalties on it.

Of course for a few hundred pounds it's vanishingly unlikely that they'll do anything other than send a reminder letter to do your taxes, and if you cooperate then that'll (likely) be the end of it, but still, it can and does happen.

A small number of multi millionaires totals a smaller total than a huge number of "ordinary" people evading smaller amounts. Anyway, it's all anecdotal re millionaires evading tax. Many will be legally "avoiding" tax through legitimate reliefs and allowances specifically voted for in Parliament, like ordinary people can do, i.e. ISAs, pension contributions, SEIS/EIS/VCT schemes, and yes, legally investing in businesses to legally get tax relief on the investment - i.e. doing exactly what Parliament intended when the legislation was voted for!

Different story for a tiny number of million/billionaires who deliberately evade tax by artificially pretending to live abroad in tax havens etc or similar illegal lies.

If caught she will be in trouble, back tax, fines, possible prosecution.

How do you know what she's declaring and not declaring? If you can earn £1000 & not need to declare, perhaps she's declaring only the income that puts her above £1000.

It will also increase more given the recent announcement about increasing resources for the HMRC!

Back in the 80s and 90s, HMRC were very hot on the black economy. With all the amalgamations/reorganisations and redundancies of the noughties, it all fell apart, but there are initiatives now to start increasing resources to tackling tax evasion. Better late than never.

Back in the 80s and 90s, Inland Revenue and especially HM Customs and Excise were very hot on tackling evasion among ordinary people, i.e. the black economy, with random checks of records, random visits to business premises, random checks of people's declared income against lifestyle, etc.

The fact they've been virtually invisible for the past twenty years is what has led to lots of "ordinary" people evading tax by not declaring income. They see others get away with it, and decide to risk it themselves. I suspect that mindset will start to change IF HMRC are serious and use the additional resources wisely!

They have been quite successful tacking tax evasion of people not declaring rental income and capital gains from investment properties/buy to let which has been one of their major initiatives over the past few years, so they're likely to expand that into other areas.

Why are you so invested? How do you know if she doesn’t declare it? HMRC won’t look into someone making a few hundred quid on the side.

They will and they do. Maybe the chances are pretty small of them doing it, but if a particular taxpayer is chosen for whatever reason, they will go as deep as they want. New/trainee tax inspectors often "cut their teeth" on random small enquiries/investigations. I've suffered more than my fair share. One memorable case even wanted full details of random amounts under a tenner paid into the poor sod's bank account, wanting chapter and verse of who paid in, and why - they were for things like friends paying their share of a cafe bill etc. Unless you've experience of a HMRC full enquiry, you don't appreciate how deep they delve!

If she's actually earning £100pw every week in the school year (highly doubtful, hardly any Primary children have tutoring in the first and last couple of weeks of any term and many GCSE/A level students will be starting exams in May and ending any tutoring there) she probably owes about £600 in tax annually. HMRC will not be chasing that up- it would cost them more than it's worth. She's probably not paying it because she can't be bothered with the paperwork rather than because she doesn't want to pay it.

She can earn up to £1000 without having to declare. Your friend is doing nothing illegal.

She's silly not to declare it

The first time she pisses someone off they're gonna go straight to HMRC to report her.

But if she's earning £100 per week that's over five grand a year - definitely something that needs to be declared.

This, 100% this

The outrage needs to be direct to those sitting on millions and millions in their bank accounts, not people at the bottom trying to make ends meet.

Has she herself actually told you she is not declaring it? If 2023-4 tax year she still has time to complete a tax return for earnings April2023-2024.

If you are selling your own belongings on eBay or Vinted that's not taxable income. It's only taxable income if you are buying stuff in to sell.

Why is she accepting bacs transfers rather than preferring cash?

This.

Tax evasion at this level truly infuriates me. It’s the biggest part of the ‘tax gap’ and is part of the reason of the state of the country. It’s not much on an individual level, but it’s huge at a societal level.

And those people who evade tax in this way are usually the ones who will spout off about how unfair it is that large corporates don’t pay their taxes or the rich hide their money offshore - when that simply isn’t true… most large corporates and high net worth individuals pay large sums to advisers to make sure their tax affairs are compliant with the rules.

I would absolutely report this person if I knew them.

I hate this kind of thing. Why do the people who do it and don't pay the tax always bloody tell someone that's what they are doing? Are they looking for permission or reinforcement it's okay?

Someone I know who is now retired told me they had done the exact same thing as the OP's friend in the past. I don't know why she told me, I barely know her. Hadn't paid the tax she should have over a period of years. Same person is now bemoaning she doesn't have a very good pension. Go figure.

We need to stop turning a blind eye to people working in the black economy.

Tax dodging is not being a lovely person.

Your friend seems to be charging a low rate. Surely it would be less stressful to charge a higher rate and accurately self assess.

Agree that she is likely evading a small amount of income tax, however I doubt that HMRC have the capacity to chase people like this. As a comparison, our local nursery owed MILLIONS in unpaid tax and was not even paying its low-paid employees their National Insurance. Their time is better spent pursuing people like this in my opinion.

How do you know she's not declaring it?

www.nurseryworld.co.uk/content/news/nursery-owner-jailed-for-tax-fraud/

We pay way too much tax. Good on her for making herself some extra cash for her family while also working