Do I need to pay tax on my freelance earnings?

Q Following redundancy, I was offered two pieces of home-based work by an ex-colleague, which paid a grand total of ?300. This was paid by a personal cheque. Do I have to pay tax on this income? If so, what do I need to do? I am receiving a company pension and other payments for part-time work.

DC

A The short answer is that you are liable to pay income tax on any earnings, providing of course that your total income for the fiscal year from April to April exceeds your tax-free personal allowance (?4,615 for a basic rate tax payer).

Any additional income is simply added onto the amount you have already received in the form of pension payments and so forth, and is then liable to tax at the appropriate rate - either 22% or 40%.

The fact that you were paid by a personal cheque would obviously make it harder for the Inland Revenue to trace the payment, but if you don't declare it (on your annual self-assessment form) you would be guilty of tax evasion and a potential fine if it came to light.

However if you are undertaking a fair amount of part-time work from home you can legitimately claim tax allowable expenses - such as the cost of phone calls and possibly provision of office equipment. You would have to provide details of such expenditure, which involves some effort that may not be worth saving a small amount of tax.