For the sake of earning some extra money, you could get yourself into a lot of trouble from the taxman and your employer. Find out how to do it right.
People who make a business of selling goods on the internet, teachers who supplement their incomes by giving private lessons, personal trainers who do work on the side without declaring it to the taxman, builders and others who fail to pay VAT and/or income tax are all on the taxman's hit list.
Don't worry if you only sell a few things on Amazon or eBay occasionally - HMRC is targeting those that earn a regular income from selling goods for profit on the internet without registering for VAT and paying tax on this income as well as national insurance contributions. Be aware that the taxman claims to have developed new sophisticated 'web robot' software to catch those breaking the tax rules.
If your annual turnover exceeds £73,000 you need to register for VAT. Below this threshold, registration is voluntary. It is often worth registering even if you don't have to because the VAT rate you pay as an artist or freelance journalist, for example, is lower than the 20% rate you charge on any goods and services you sell - which means you pocket the difference. It does involve more paperwork as you have to fill in a quarterly VAT return every three months.
If you do any contract or freelance work on top of your main job, you need to be registered as self-employed and fill in a self assessment tax return every year. Failure to do this on time can result in a £100 fine. Also make sure this extra work doesn't clash with your main job. (It is worth telling your employer.)
It might be tempting to think that HMRC won't catch you if you've failed to register for VAT or are breaking its rules in other ways. But don't be complacent - they have more resources at their hand than you think. For example, the new software will pick out those who sell regularly on sites like eBay, Auto Trader, E-auctions, Amazon, Craigslist and Gumtree, and compare their names to those on HMRC's tax records.
HMRC could take criminal action against you (it is in the middle of 16 criminal investigations at the moment). Even if you get away with a fine, be aware of the potential impact that being caught offending could have on your career. You could easily get sacked for moonlighting and breaking tax rules.
Before you panic, the good news is that HMRC is offering an amnesty to those who come clean in the next few months. They won't be fined all of the tax owed but a penalty of just 10%.
So don't lie to the taxman and don't destroy any evidence - missing paperwork will only make HMRC more suspicious. Don't discuss your tax affairs with anyone but your tax adviser. If you don't have an accountant, get yourself one asap to get professional advice on what you should do. If you do get a good settlement with HMRC, don't brag about it - this could get back to the taxman.
Finally, pay up promptly when asked to do so to show you are co-operating with the taxman, and to save on interest.