Do I have to report all income?

As a taxpayer in the UK, one of the most common questions people have is, “Do I have to report all income?”

The short answer is yes – generally, you are required to report all your income to HMRC.

However, there are some exceptions and thresholds that might apply, depending on the type of income you receive and how much you earn. In this post, we’ll break down when and how you need to report your income and which types of income may be exempt or not require reporting.

When Do You Need to Report Income to HMRC?

In the UK, you need to report your income to HMRC if:

You Earn Above the Personal Allowance
The Personal Allowance for the 2024/25 tax year is £12,570. If your total income from all sources exceeds this amount, you must report it. This includes earnings from employment, self-employment, pensions, rental income, savings interest, dividends, and more. If your income exceeds this threshold, you will also need to pay tax on the portion that goes over the allowance.
You Are Self-Employed
If you are self-employed, you must report all your income, regardless of the amount. This includes earnings from freelance work, business sales, and any other income that comes from being self-employed. If you’re self-employed, you’ll need to file a Self Assessment tax return.
You Receive Income That Is Not Taxed at Source
If your income is not taxed automatically (for example, through PAYE), you must report it. This includes income from freelance work, rental income, dividends, savings interest, or income from abroad. You may also need to report tips or side jobs where tax isn’t automatically deducted.
You Are Registered for Self Assessment
If you’re already registered for Self Assessment (for example, as a business owner or freelancer), you must report all your income as part of your annual tax return. This includes all sources of income, not just your salary or earnings from your business. If you miss any income, you could face penalties or fines from HMRC.

Are There Any Exceptions to Reporting All Income?

While in most cases, you need to report all your income, there are a few exceptions where you may not need to report certain types of income:

Income Below the £1,000 Trading Allowance
If you earn £1,000 or less from casual sales, such as selling used personal items on eBay or other platforms, you generally do not need to report it to HMRC. This falls under the trading allowance, which allows you to earn up to £1,000 tax-free from non-business activity.
However, if you exceed £1,000 in income from these casual sales, you must report it to HMRC and may need to pay tax on the excess.
Income from Personal Savings (Up to the Savings Allowance)
You don’t need to report interest earned from savings accounts if it’s within the Savings Allowance. For basic-rate taxpayers, the savings allowance is £1,000. For higher-rate taxpayers, it’s £500. If your interest earnings from savings are below these limits, you don’t need to report them to HMRC.
Income from Tax-Exempt Benefits
Certain benefits or allowances are not taxable, and you do not need to report them. Examples include:
Child Benefit (if your income is below £50,000).
Disability Living Allowance or Personal Independence Payment.
Some social security benefits like Universal Credit (though you may still need to report income if it affects your benefit eligibility).
Income from Gifts and Inheritance
Gifts from family or friends, as well as inheritance money, do not need to be reported to HMRC. However, if you earn income from selling inherited assets, such as a house, or if you receive large gifts that could count towards inheritance tax, you may need to report it.
Certain Pensions and Allowances
Some pensions and allowances are not taxable and do not need to be reported. For instance, most state pensions do not need to be declared if they are your only source of income. Similarly, certain government grants or pensions might not need to be reported, depending on the amount and your situation.

What Happens if You Don’t Report All Your Income?

Failing to report income can result in penalties or fines from HMRC. If you knowingly withhold information, you may be subject to an investigation for tax evasion, which can lead to significant penalties or even criminal charges in extreme cases.

HMRC takes undeclared income seriously, especially when it comes to self-employment, freelance work, or income from abroad. It’s always best to be honest and report everything, even if you’re unsure whether it qualifies for tax.

How to Report Your Income

If you need to report your income, you’ll typically do this through Self Assessment by filling out an annual tax return. The process involves:

Registering for Self Assessment: If you haven’t already, you need to register for Self Assessment by 5 October following the end of the tax year.
Filing a Tax Return: Complete and file your tax return by 31 January. Make sure to report all your income, including earnings, dividends, interest, and any other taxable income.
Paying Any Tax Due: Once you’ve submitted your tax return, you’ll need to pay any tax owed to HMRC by the 31 January deadline.

Final Thoughts

While you generally need to report all income, there are some exemptions, such as casual sales under £1,000 or interest earned under the savings allowance.

However, in most cases, it’s essential to be transparent with HMRC and report your income, whether it’s from your job, self-employment, savings, or any other source. Not doing so can result in penalties, so it’s better to be proactive and ensure you’re compliant.

If you’re ever unsure about whether you need to report specific income or how to handle it, consulting with a tax professional or accountant is always a wise step to avoid mistakes.

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