Side hustles, crypto and tax reliefs: Know what to declare to HMRC and avoid overpaying with these self-assessment and tax return tips

With the 31 January deadline to file electronic tax returns fast approaching, the almost 50%[1] of those who wait until the last month to file may be feeling the pressure. If you do not have a tax adviser to prepare your return for you, self-assessment can be something of a minefield, with potential liabilities that some earners might not be aware of, as well as available reliefs that could be overlooked.

Toby Tallon, Partner in Private Client Tax Services at professional services and wealth management firm Evelyn Partners, has the following self-assessment and tax return tips.

1. Check potential tax liabilities

• Do you have a side hustle, for example selling items online? Many taxpayers are unclear if such income should be declared. If the money raised was in the nature of a trade, then it is taxable. However, there is a £1,000 trading allowance, which means that for most taxpayers small amounts of extra income will likely mean no extra tax. If you are filing a return then you should declare this income and, if your trade expenses are less than £1,000, tick the box to claim the allowance instead of these expenses.
  
  
• Cryptoassets, Income from cryptoassets should be declared as with all other income. Similarly, disposals over the normal thresholds for capital gains must be declared. Chargeable disposals are not just sales, but include exchanging a cryptoasset for something else, whether buying a good or service or changing to another cryptoasset. and giving away cryptoassets. Capital gains tax (CGT) may be due if there are gains, but equally if losses have been made then they need to be notified to HMRC to be set against future gains. HMRC has increased its attention on cryptoassets with a voluntary disclosure facility recently opened[2] for undeclared income or gains from previous years. If you have an unclaimed loss from the last four tax years then you can claim this by just writing to HMRC.
  
  
• Gifts of assets. Disposing of assets can incur a CGT charge even if it is not a direct sale. For example, giving away shares or an expensive painting to a family member might need to be declared.

2. Use all reliefs to avoid overpaying

• For those contractually obliged to work entirely at home, working from home tax relief could be worth up to £140 for additional rate, £125 for higher rate, and £62 for basic rate taxpayers.
  
  
• If you have a rental business and your rental expenses are less than £1,000, you can claim a flat rate £1,000 property income allowance deduction instead of the rental expenses.
  
  
• Personal pension contributions that are made outside of your employment payroll should be included in your tax return. If you are a higher or additional rate taxpayer then, as well as basic rate tax relief being automatically added to your pension contribution, you can claim the excess tax relief from the higher or additional rate via your tax return.
  
  
• Including your gift aid payments on your return will result in money off your tax bill if you are in the 40% or higher tax band. As fiscal drag moves more taxpayers into this category, then those who have not previously bother to tally up their gift aid donations should do so.

3. Check the clauses

• Disposals of UK residential property liable to CGT should be reported online to HMRC and the tax liability paid within 60 days of completion. You still need to include the disposal on your annual tax return, along with as the tax already paid on it, which will be deducted from the full liability on your total income and gains. If you did not file an online report then you can file a late one online with HMRC.
  
  
• The tax courts recently considered several cases on child benefit, where an invalid claim was made due to lack of communication between partners. If your income is over £50,000 and you live in the same household as a child under 18, have you checked whether your partner is claiming child benefit? If so, a tax charge (the “high income child benefit charge”) is payable by the parent with the higher income. This could be the case even if that parent is not the one claiming the child benefit, or if even if the child living with you is not your child.

4. Bear in mind…

• It is still possible to make a donation under gift aid now and make a carry back claim to reduce your January tax bill. Donations that are made before 31 January and, crucially, before the return is filed can be carried back one year and included on the tax return being prepared now. This could be particularly valuable if your income straddles a tax threshold.
• Don’t miss the payment deadline of 31 January. The late payment interest rate is now 7.75% a year (up from 6% in January 2023 and 2.75% in January 2022), and other interest and penalty charges can also apply.
  
  
• Last Christmas filing? This could be the last tax return for taxpayers with income between £100,000 and £150,000 that is solely derived from PAYE. Currently, anyone with income over £100,000 must file a self-assessment return, but from next tax year that threshold will increase to £150,000 for taxpayers.[3] This will mostly affect PAYE taxpayers, as if they meet the filing criteria in another way, such as having rental income, then they will still need to file a return.

NOTES

1 Gov.uk link

2 https://www.gov.uk/guidance/tell-hmrc-about-unpaid-tax-on-cryptoassets

3 https://www.gov.uk/government/publications/agent-update-issue-108/issue-108-of-agent-update#:~:text=in%20the%20year.-,Self%20Assessment%20threshold%20change,returns%20remains%20at%20%C2%A3100%2C000.