Working cash in hand

[NoName543210]

I currently have a small job which pays about £5000 per year. I am on the payroll for this, get proper payslips etc.

My neighbour is a self-employed cleaner and has increasing demand. She's offered me 5 hours per week cash in hand - so I would invoice her at the end of each month. This could work out at about £3500 per year, taking my total earnings to £8000-£9000.

Since this is clearly below the tax threshold, would it be ok to do this without involving HMRC or registering anywhere? I just don't see the need if I wouldn't be paying tax anyway. I'm not entitled to any benefits either (due to my savings + DH's income) so that's not a factor.

Any advice much appreciated!

Owned with a small mortgage. I haven't posted on here about anything financial before though.

Interest from ISAs is non taxable and doesn't need declaring.

Not really huge savings. Around £40000 in a fixed 5% is going to give £2000 a year. It's a fair amount but hardly HUGE

where can you get 5% interest in a high street savings account where the OP has deposited?!

Do it properly. If we owe taxes, we should pay them

There's plenty of accounts available that are still paying around 4.5 to 5%. I have 3 separate savings accounts ranging from 5.6% for a 2 year fixed term cash isa to 10% on a 1 year regular saver. The point is you don't need huge savings to gain a couple of thousand in interest a year.

I haven't read through everything so maybe someone's already said it, but I'm self employed and it's not difficult. Well, now I'm earning more and have complications in my wages like meal allowances and accommodation and fuel it takes a bit longer to do, but I started out with pretty simple income and outgoings. You just tell them the total earned from business and the total spent on the business, and they calculate what was profit. If I've ever been unsure about something ( many times) I've just called them up or used their chat service to keep my right. Oh and I think you get £1000 tax free interest earnings (from non isa) before you start paying tax on them. Obvs check my facts. Martin money expert is such a good guide.

Op you didn’t need to be registered previously as you earned below £1000. So don’t worry about previous years.

Maybe technically you should’ve informed HMRC about the savings interest, but firstly no tax is due because of your low income and secondly interest rates have been really low until recently anyway so you were probably under the 1k savings allowance. So I wouldn’t worry much about that either.

If the income will make a difference to you and you want to do the work, then don’t let the paperwork prevent you from getting it. You won’t owe any tax based on your current situation and they are not hard to complete at all.

If you claim the marriage tax allowance then you probably already have a government gateway account, and if you don’t, they aren’t hard to set up.

Also it’s worth looking at your state pension situation. You don’t have to earn much to be entitled to the credit for the year, it’s around 7k. Not sure if you have kids, but child benefit also entitles you to the credit.

on the flip side, if you’re not going to have to pay tax, why not declare it anyway?
Once you earn £1k self employed, it should be declared.
You'll likely need to pay NI which will go towards your state pension.
If you need a mortgage or bank loan, it’s useful to have been honest on your tax return to show how much you genuinely earn and, therefore, how much you can borrow.

Apologies as I might be repeating what others have said. If your income goes above the ? lower earnings limit which is just under £7000, then it is in your interest for HMRC to know about it as you might be entitled to NI credits but not required to pay anything towards them (as of the last couple of years). I'm not entirely sure how the combination of employment and self-employment impacts that. I agree with others that you don't sound likely to have to pay any tax at the income levels you're talking about.

Self-assessment sounds a bit scary and complicated but I've done a few now and they're not too bad. Although I've also got significant interest income to declare now (like you from inheritance) which will require a bit more care with the forms.

If the savings is in ISAs the interest is tax free.

And you don’t need a financial advisor for 40-50k savings, you just need to read the savings pages on MSE.

This is correct. Whether a working arrangement is that of employer/employee or self-employment is decided on the facts of the arrangement, not what the people concerned want it to be.

From what you've told us OP, it sounds like you would be an employee and should be on payroll under PAYE. And, of course, your employer should also comply with all the other responsibilities of being an employer.

However, since this is the real world, if your neighbour will only engage you on a self employed basis and you are happy with this then you should register as self employed. It's not difficult and the tax return is tedious but easy.
If HMRC ever look at the arrangement (unlikely i would say) and reclassify you as an employee then it is the employer that will have to stump up any tax/penalties etc - they are the ones who've made the mistake, you've done what you thought was correct by registering as self employed. So i would say this is a low risk (for you) route

And dont worry about the 'undeclared' interest - HMRC have a big information hoover that sucks up this type of info so they will know already. You only need to 'declare' interest if you have to complete a tax return (and will probably find the box pre-completed when you do)

and that 'off payroll' stuff is not relevant to your situation