Do I Need to Notify HMRC of a Pay Rise?

When a worker experiences a pay rise, knowing whether or not to notify the Her Majesty’s Revenue and Customs (HMRC) is a common question. This article will provide an overview of the guidelines and implications for notifying HMRC about a pay increase.

Notify Your Employer

For those working under the PAYE (Pay As You Earn) scheme, there is no need to directly inform HMRC about a pay rise if you do not have any other sources of income. Your employer is responsible for adjusting the tax deductions according to your new salary. For example, if you previously earned a certain amount and received a pay rise, your employer will adjust your tax code to reflect the increase in earnings, ensuring that the correct amount of tax is being deducted from your pay.

The Need for Notification if Self-Employed

For self-employed individuals, the situation is a bit different. If you are self-employed and report your income annually through a tax return, you are required to notify HMRC of any pay or income changes. This includes any gains from freelance work, side hustle income, or any other sources of income. Failing to report such changes can result in fines or even an investigation into your previous tax submissions.

Complicated Situations and Side-Hustles

Consider a scenario where you are a salaried employee with a side-hustle that generates more than ￡1000 in a year. In this case, your employer will notify HMRC of the pay rise, but you will also need to report the income from your side-hustle in your tax return. This is because the income from your self-employment needs to be declared and taxed separately from your salaried earnings.

General Guidelines

No matter the situation, if you are ever in doubt about the need to notify HMRC of a pay rise, the best course of action is to contact HMRC directly. They can provide clear and precise advice based on your unique circumstances. Don’t rely solely on the general guidelines as there may be specific rules that apply to your situation.

Conclusion

Overall, the main factors that determine the need to notify HMRC of a pay rise are whether you are employed or self-employed and whether you file an annual tax return. For employees under the PAYE scheme, no direct notification is required for a pay rise, as long as the new salary is reported to the employer. However, for self-employed individuals, it is crucial to declare all sources of income, including any pay rise, on your annual tax return to avoid penalties or investigations.