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?

Exactly this ^^

Leave her alone OP. It really is none of your business.

OP it really is nothing to do with you.

Why does she already do a tax return? You normally only do one if you're self employed or if you have to repay some child tax credit.

If she's already doing a return, it would be foolish of her not to include it if it's above the £1,000 threshold.

It is possible that HMRC will pick it up because they do receive reports from banks, but at the levels of income involved, it is pretty unlikely that they will do so.

I have worked in accountancy for over 25 years and have not been involved in any tax enquiries for lower earning clients. The tax enquiries tend to come with higher earners, or those that have done something more major, like "forgetting" to include rental income on their property in their tax returns. In that case, HMRC did do a cross referencing of land registry details for any multiple home owners to catch people out but gave an amnesty against any penalties for people to own up.

Even if someone reported her, I don't think she'd be anywhere near the top of HMRC's priority list. At around £100 a week, let's say she earns £5k a year. She'd be generating a tax bill of up to £2k on it if she's a higher rate tax payer (but could reduce it by accounting for eligible costs).

As much as £2k is probably a lot to her, I know of people that have racked up debts in the 10's of thousands with HMRC and all they've done for years is send a reminder letter that it needs paying.

Is it right? No, but I expect she'll get away with it just fine.

And yet in the next breath people like you will be saying they want better roads, better NHS, better policing, etc. Don't you see the link??

Well I'd report her, but then looking for this sort of thing is part of what I do for a living.

Absolutely! Or we'd all be doing it!

You think someone who chooses to keep more of their own money than the (inept) government would like, is worse than someone who actually steals from the public coffers?

There's no difference.

I have no doubt the local chinese restaurant was making thousands of undeclared income over the holidays. They were beyond slammed on Christmas Eve, and their take out side had roughly 2 hour waits they were so insanely busy.

I noted they went to cash only for the night for take outs.

If she is only taking around£100 a month, by the time she has set expenses against it, she will probably be within the £1000 tax free side hustle!

I'm no expert on the legal side of things but morally there's no comparison. Tax evasion is keeping your own hard earned money, whereas benefit fraud is stealing someone else's.

I doubt if she’ll get found out. My friend is a teacher and does some tutoring. I doubt very much that she declares it (not the sort of thing we’d discuss). But why would anyone care enough to report it? You’d have to be some kind of petty minded misery, hopefully she doesn’t know anyone like that.

I had a depute who was chased up because she was getting her depute's wage plus being paid by the SQA for marking and setting.

I still can't get my head round how it could have been missed for a few years, but apparently she'd not bothered to inform the council about her extra wage, so her code hadn't been adjusted.

They initially wanted all the money at once, but when she pleaded poverty said that she could pay back so much per year.

They are both equally stealing from the public coffers. But someone trying to survive on eg Carers Allowance of £81.90pw and eating from food banks because they will starve otherwise who fiddles their claim to get an extra £20pw is less despicable than a teacher on a comfortable income cheating the system for the same £20pw.

In my own situation, I finished up getting money back from the HMRC because they erroneously thought that I was getting a middle manager wage plus my teaching pension plus a bit of supply money.

In later years, they've clawed money back because they reckon I've not paid enough tax. No idea why - I'm PAYE for everything: teaching pension, a percentage of my late husband's teaching pension plus an occasional bit of supply.

Apparently I'm penalised for having a dual income, according to the notes I get every year - they adjust my personal allowance down the way.

Our local Chinese takeaway has only ever accepted cash.

Very many takeaways are. I doubt a lot of them would be viable businesses if they declared all their earnings and paid tax accordingly.

She earns £100 a week not per month - so over five grand a year.

Ours usually allows paying by card via their online ordering form; they have a solid business. They went to cash only on the night.

Not true

Some friend! I wouldn't be pleased if I found out you were discussing my income (extra or not) to strangers on the internet, you say you're worried about them being caught but have no problem sharing how much extra they're earning. Perhaps better to voice your concerns to her privately, if you are genuinely worried she may be caught out. You don't know who's reading these threads.

How many people has she told? It seems a strange thing to tell anyone. Im curious if she isn’t declaring this why she is doing self assessment, what IS she choosing to declare. She’ll just have to pay back what she owes possibly with a bit of penalty. But I doubt she’ll be caught unless someone dobs her in.

You're not "penalised" at all. Everyone gets the same tax free allowance, regardless of how many income sources. When you have more than one income source, HMRC have to allocate it accordingly, either all against one income, or split between different income sources. But there's no "penalty". You'll be paying the same tax on £x income from 3 sources as you would if it was all from the same single source.

She also has a full time teaching job so can't do this

Trouble is that it won't just be tax evaded on the sales. They'll probably be paying undeclared cash to staff too, who likewise aren't declaring it and probably over-claiming income related benefits. Probably also VAT evasion. Takeaways are renowned these days for even employing illegals and some even have them virtually enslaved and "living" in bunks above the shop!