Guidance

Second Incomes Campaign: your guide to making a disclosure

Updated 12 June 2017

This guidance was withdrawn on

The Second Incomes campaign has now ended. Find out how to make a disclosure.

This publication was archived on 7 August 2017.

1. About the Second Incomes Campaign

1.1 Introduction

HM Revenue and Customs (HMRC) believes that its customers want to pay the right amount of tax and wants to help those that arent paying the correct amount to put that right.

The Second Incomes Campaign is an opportunity for individuals to bring their tax affairs up to date if they have additional income that isn’t taxed through their main job or another Pay As You Earn (PAYE) scheme. People with undeclared income can get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

If you owe tax on your income you must tell HMRC about any unpaid tax now. You will then have 90 days to calculate and pay what you owe. This guide explains how you can do that.

1.2 The scope of the Second Incomes Campaign

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

Examples could include:

  • fees from consultancy or other services such as public speaking or providing training
  • payment for organising parties and events or providing entertainment
  • income from activities such as taxi driving, hairdressing, providing fitness training or landscape gardening
  • profits from spare time activities such as making and selling craft items
  • profits from buying and selling goods, for example regular market stalls, boot sales etc

1.3 Disclosures outside of the Second Incomes Campaign

You can still make a disclosure and put your tax affairs in order even if you aren’t within the scope of the Second Incomes Campaign. Your disclosure won’t be part of this opportunity and the terms offered under the Second Incomes Campaign won’t be available.

1.4 How to take part in the Second Incomes Campaign

To take part in the Second Incomes Campaign you should:

  • tell HMRC that you want to take part in the Second Incomes Campaign (Notify)
  • tell HMRC about all income, gains, tax and duties you’ve not previously told them about (Disclose)
  • make a formal offer
  • pay what you owe
  • help HMRC as much as you can if they ask you for more information

To benefit from the reduced penalties offered HMRC will take account of the level to which you have helped them and the accuracy of the information you provided.

1.5 What’s in it for you

Whether the errors were due to misunderstanding the rules or deliberately avoiding paying the right amount it is better to come to HMRC and admit any inaccuracies rather than wait until we uncover those errors.

The Second Incomes Campaign offers the best possible terms available to get your tax affairs in order. You can take advantage of these by notifying your intention to participate and cooperating with HMRC to make a full disclosure and payment.

When you make your disclosure you can tell HMRC how much penalty you believe you should pay. What you pay will depend on why you have failed to disclose your income. If you have deliberately kept information from HMRC you will pay a higher penalty than if you have simply made a mistake.

You may not have to pay any penalty at all but if you do it is likely to be lower than it would be if HMRC finds out you haven’t paid enough tax.

Don’t worry if you can’t afford to pay what you owe in one lump sum, if your circumstances warrant it, you will be able to spread your payments.

If you’re registered for Self Assessment and completed tax returns within the appropriate time limits, but have simply made a careless mistake when declaring your income, you only pay for a maximum of 6 years - no matter how many years you’re behind with your tax affairs. If however you don’t come forward and HMRC finds later that you are behind with your tax, it may be harder to convince them that it was simply a mistake. The law allows HMRC to go back up to 20 years and in serious cases HMRC may carry out a criminal investigation.

This is an opportunity to stop worrying about what might happen - have certainty about what you owe and get things right for the future.

1.6 If you have undisclosed liabilities and choose not to disclose

HMRC is targeting tax evasion through second incomes and will use information it holds on its digital intelligence systems to identify people who mightn’t have declared all their income. This will involve HMRC carrying out checks or enquiries to resolve matters. The customers involved won’t then be able to make use of the opportunity offered as part of this campaign.

Where additional taxes are due we’ll usually charge higher penalties than those available under the Second Incomes Campaign. The penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore related income.

In serious cases HMRC may consider the instigation of a criminal investigation, in line with their criminal investigation policy.

2. How to notify and disclose

2.1 Notify

You must tell HMRC of your intention to make a disclosure. You need to do this as soon as you become aware that you owe tax on your income.

At this stage, you only need to tell HMRC that you will be making a disclosure.

You don’t need to provide any details of the undisclosed income or the tax you believe you owe.

You can tell HMRC you’re going to make a disclosure:

  • about your own tax affairs
  • on behalf of someone else (for example if you are a tax adviser or personal representative)

You can’t include details for more than one person on a disclosure. For example if a husband and wife both have undisclosed income they must complete separate disclosures, each showing the share of the income they need to disclose. A separate notification is required for each person.

Individuals and companies

Individuals and companies can notify by completing the DDS form. HMRC will write to you to tell you your unique Disclosure Reference Number (DRN). Use this whenever you contact them about the Second Incomes Campaign. You’ll also be given a Payment Reference Number (PRN) to use when paying what you owe.

Agents

Agents should use the digital disclosure service to notify HMRC of your clients disclosure. We’ll then send you out a disclosure reference and a payment reference.

If after you’ve notified you realise you no longer need to make a disclosure you must tell HMRC by calling the Second Incomes Helpline on Telephone: 0300 123 0945. If you don’t HMRC will take follow up action to secure a disclosure from you.

2.2 Disclose

You can do this as soon as you have your DRN but you must disclose within 90 days of the date you receive your notification acknowledgement.

You can make a disclosure:

If you are unable to use the internet to make your disclosure you can call the Second Incomes campaign helpline on Telephone: 0300 123 0945.

When you send your disclosure you must pay what you owe.

Please make sure that HMRC receives your disclosure and payment by the date stated on your notification acknowledgement. If you can’t pay what you owe by the deadline given you must have made payment arrangements with HMRC by that date.

If you don’t do this you won’t be able to make a disclosure under the Second Incomes Campaign and won’t receive the certainty of terms and conditions within it.

3. Prepare your disclosure

3.1 Calculate what you owe

Depending on your circumstances this could be simple or complicated and you may want to seek independent professional advice. Although you have 90 days from the date you receive your notification acknowledgement to make your disclosure, you should start gathering together your information and records as early as possible. HMRC can’t provide individual advice on calculating how much you should pay.

You’ll need to work out the total income for each year you have previously failed to tell HMRC about. You don’t need to include any income in your disclosure that you’ve already told HMRC about, for example income from your PAYE deduction or on a previous tax return. This is because tax should already have been paid on this income.

If relevant, you will also need to calculate the allowable expenses that you incurred on your self-employment income. You can’t claim any expenses that you have already claimed on income you have previously told HMRC about. Allowable expenses are the things you spent money on as part of the day to day running of your business.

You will then need to deduct the allowable expenses from your income in order to determine your taxable profit. Not all of the expenses you incur will be allowable as a deduction.

Once you have calculated the additional income you need to disclose you will need to work out how much tax you owe on that income. The rates of income tax you will pay depend on how much income you earn above your Personal Allowance, which is an annual amount of tax free income. If you have already received PAYE income and/or told HMRC about some other income and are now disclosing additional income for any year you need to make sure that you take this into account in your calculations.

You may be able to use the calculator to work out interest and penalties that are due on tax liability for up to the previous 19 years. You’ll need to calculate the tax liability due for each year manually prior to using this tool.

If you or your partner are receiving or have recently made a claim for tax credits you should still make a disclosure but tick the appropriate box on your disclosure form. The information will be passed to the tax credit office to consider. You will be notified separately of any changes that may be required to the amount of tax credits you receive for the relevant years. If you have made a joint claim for tax credits you may need to tell your partner that the award may be adjusted as a result of your disclosure.

3.2 If you don’t have all the business records you need to make your disclosure

If your records are incomplete you should make your best estimate of the undisclosed income and gains and use this to make your disclosure. HMRC may ask you to explain how you have worked out any estimates you have used, so you need to keep your calculations.

If you have your bank statements for the period of your disclosure they will probably help. If you don’t have them HMRC recommends you contact your bank as soon as possible to get copies.

If you can’t get copy statements at all, you should work out your income by using more recent statements as a guide to your income and expenditure. HMRC may ask you to explain why you couldn’t get copy statements.

If you haven’t kept proper business records you should begin to do so immediately. This opportunity is your chance to put things right from now on. If HMRC finds in the future that you have failed to keep appropriate records, they can penalise you up to £3,000.

3.3 Income to include in your disclosure

Include all of the income you’ve not told HMRC about before in your disclosure.

Income earned in either the current tax year or the year prior to the current tax year

Any income you’ve had in the current tax year shouldn’t be included in your disclosure. If you aren’t registered for Self Assessment and will continue to receive a second income you will need to register now.

HMRC will send you a tax return or notice to file a tax return shortly after the end of the current tax year. Report this income on that tax return by the deadline. There are different deadlines for individuals and companies. Include the income you had in the year before the current tax year on a tax return rather than in your disclosure. If you’ve submitted the previous year’s tax return you can make an amendment within 12 months of the statutory filing date.

Income tax returns

Income Tax returns usually need to be submitted following the end of the tax year:

  • 31 October for paper returns
  • 31 January for online returns

So it’s likely that, for current and prior year, you’ll still have time to submit an accurate tax return including this income.

You can make a disclosure for all tax years up to and including 2015 to 2016. But if we’ve sent you a return for any year from 2013 to 2014 that’s still outstanding you must complete each return and don’t include those years in your disclosure

3.4 How many years to include in your disclosure

This depends on why things went wrong.

If you’re taking part in the Second Incomes Campaign you will know why you haven’t previously told HMRC about your income or paid the right amount of tax.

You’ll need to understand when you should have told HMRC that you were receiving additional income as this will have a bearing on the number of years that you will now need to disclose.

HMRC also asks you to decide whether you made an error despite taking reasonable care, whether you were careless, or whether it was something you did deliberately. How much you pay will depend on the answers to those questions.

If you failed to notify HMRC about receiving a second income

When you start to receive a second income the latest you should tell HMRC is 5 October after the end of the tax year for which you start to receive that income. If, for example, you have tax to pay on income in the 2016 to 2017 tax year, you need to let HMRC know by 5 October 2017.

If you failed to register for a Self Assessment tax return by the appropriate deadline you will have to pay HMRC what you owe up to a maximum of 20 years.

If you have taken reasonable care

If you registered for a Self Assessment tax return by the appropriate deadline, have taken care to make sure your tax affairs were correct but you have still paid too little, you will only have to pay HMRC what you owe for a maximum of 4 years. This means you:

  • will need to make sure that your tax affairs for the current and later tax years are accurately reported on tax returns by the appropriate deadlines
  • will need to make sure that your tax affairs for the year prior to the current tax year are reported on the tax return that was issued to you for that year by the appropriate deadline
  • have to complete the disclosure form and pay HMRC what you owe for the 3 years prior to this

If you were careless

If you registered for a Self Assessment tax return by the appropriate deadline but you have paid too little because you were careless, you will have to pay HMRC what you owe for a maximum of 6 years. This means you:

  • will need to make sure that your tax affairs for the current and later tax years are accurately reported on tax returns by the appropriate deadlines
  • will need to make sure that your tax affairs for the year prior to the current tax year are reported on the tax return that was issued to you for that year by the appropriate deadline
  • have to complete the disclosure form and pay HMRC what you owe for the 5 years prior to this

If you deliberately misled HMRC about this income

If you have deliberately paid too little tax you will have to pay HMRC what you owe for a maximum of 20 years.

HMRC expects most people to have to pay a maximum of 6 years but there will be some who need to pay more. These are people who have either:

  • deliberately told HMRC they have earned less than they have
  • not told HMRC anything at all about their income

3.5 Other liabilities you should include in your disclosure

A condition of taking part in the Second Incomes Campaign is that you include all of the income you have previously not told HMRC about in your disclosure as well as the income you receive from your second income. This may include:

  • investment income not taxed before you receive it, for example, interest
  • income from property or land rental etc (less the expenses relating to that income)
  • capital gains made on the disposal of investments, such as land, property, shares, stocks, bonds, goodwill

If your only undeclared income is from residential letting you should use the Let Property Campaign to disclose this.

3.6 Other liabilities you can tell us about in your disclosure

The following types of liabilities can’t be included in your disclosure form:

  • VAT
  • employer tax
  • Inheritance Tax
  • trust income or income arising during a period of administration

You can however tell HMRC on your disclosure if you think you may need to resolve any issues for these types of income and your details will be passed on to the appropriate department within HMRC. You will be contacted by someone who will explain how you can correct your tax affairs for these areas.

You can also indicate on the form:

  • if you need to resolve any issues regarding your residency status to determine your chargeability to UK tax
  • if you or your partner have received tax credits in any of the years you have included in your disclosure as HMRC may need to review these payments

The disclosure form includes further guidance to help you decide whether you need to tell HMRC about these issues or not.

3.7 Interest

HMRC charges interest from the date tax is due until the date it is actually paid. Interest is calculated on a daily basis. Any additional tax that is included in your disclosure will be late and so will attract an interest charge. If you fail to include the correct interest your disclosure will be rejected as it will be incomplete. HMRC has produced a calculator that you may be able to use to work out what you owe. This can be used to calculate interest and penalties that are due on tax liability for up to the previous 19 years. You’ll need to calculate the tax liability due for each year manually prior to using this tool.

3.8 Penalties

HMRC charges penalties on any additional tax you owe if you:

  • sent HMRC an incorrect tax return
  • didn’t HMRC that you’ve started to be liable to tax

HMRC doesn’t charge interest on these penalties unless you pay them late.

In specific circumstances it may not be appropriate to allow you the full reductions for disclosure. For example if you’ve taken a significant period to correct your non-compliance, you can’t expect HMRC to agree a full reduction for disclosure. In such cases it’s unlikely that HMRC will reduce your penalty by more than 10 percentage points above the minimum of the statutory range. For this purpose HMRC would normally consider a ‘significant period’ to be over three years, or less where the overall disclosure covers a longer period.

The factsheets on penalties for inaccuracies in returns and penalties for failure to notify have more information on the statutory range for penalties to be reduced.

The penalty is a percentage of the additional amount you owe. We can charge penalties of up to:

  • 100% of the tax liability if the income or gain arose in the UK
  • 200% for an offshore liability

Although the rate of the penalties will vary depending on your circumstances, they’ll usually be lower if you make a voluntary disclosure.

If you’ve taken reasonable care with your tax affairs, but you haven’t declared the right amount of tax you owe, you won’t pay any penalties at all. We don’t expect many people’s circumstances to fall within this category. If you haven’t paid enough tax even though you’ve taken reasonable care with your affairs or there’s anything else you think HMRC should consider concerning the penalties you have to pay, please phone the helpline before making your disclosure.

If HMRC thinks that you haven’t included the right penalty in your disclosure, we may reject it.

You can use the HMRC calculator to help you calculate the interest and penalties due on the income you’re including in your disclosure.

If you are making a multiple year disclosure, you should include all years in a single calculation and not calculate each year on a separate, individual basis.

3.9 Your declaration

This is a very important part of your disclosure. You should only complete the declaration once you are certain that your disclosure is correct and complete and that you understand why you have been asked to include penalties in your disclosure.

3.10 Your offer

It is a condition of using the Second Incomes Campaign that you make an offer for the full amount of everything you owe. Your offer, together with HMRC’s acceptance letter to you will create a legally binding contract between you and HMRC. There are letters of offer included in the disclosure forms which you should complete.

4. Pay HMRC

4.1 When to pay

Unless you have contacted HMRC to agree additional time to pay, you should send your payment at the same time as you send your disclosure, but no later than the 90 day deadline given on your notification acknowledgement letter.

4.2 Payment Methods

Whichever way you pay, please make sure that you quote your PRN. HMRC accepts payment by a range of methods but recommends that you make your payment electronically. Electronic payments are more efficient, secure and safer than payment by post.

4.3 If you can’t pay the full amount

HMRC expects you to pay what you owe when you make your disclosure.

If you can’t pay the full amount, you’ll need to let HMRC know as soon as possible and before you send in your disclosure. To do this, you should contact the helpline on Telephone: 0300 123 0945. Lines are open Monday to Friday 9am to 5pm.

When you phone, HMRC will want to talk to you about your current financial position so they can tell you what they think you should pay and when. To help HMRC decide, you will need to tell them:

  • your DRN
  • how and when you intend to pay HMRC what you owe
  • what your current weekly/monthly income and outgoings are
  • what you own, including your home, other property/land, vehicles, investments, money in the bank etc
  • what you owe, including mortgages, loans, credit cards

If you can’t pay the full amount don’t submit your disclosure or payment until you have spoken to HMRC.

5. After HMRC receives your disclosure

5.1 Accepting your disclosure

HMRC anticipates that the vast majority of disclosures will be accepted. If after checks HMRC is satisfied that you have made a full disclosure, they will accept it as quickly as possible.

5.2 Acknowledging your disclosure

When they receive your disclosure, HMRC will send you an acknowledgment as soon as possible. HMRC will then consider the disclosure under the terms of the Second Incomes Campaign. If you haven’t received an acknowledgement within 2 weeks of sending your disclosure, please telephone the Second Incomes Campaign Helpline on Telephone: 0300 123 0945.

HMRC expects most disclosures to be self-explanatory but they may need to contact you or your tax adviser to clarify any points. You may also be asked to provide evidence of your circumstances to satisfy HMRC that your disclosure is complete. Your full co-operation is one of the conditions of using this opportunity and failure to co-operate may jeopardise acceptance of your offer.

5.3 Considering your disclosure

HMRC will review all disclosures. If after those checks are completed HMRC decide to accept your disclosure they will send you a letter accepting your offer. If HMRC can’t accept the disclosure they will contact you. If following their enquiries HMRC finds that a disclosure is materially incorrect they will seek significantly higher penalties. It is also possible that in exceptional circumstances an incomplete disclosure may be considered under HMRC Criminal Investigation Policy. In such cases the material in the disclosure could be used as evidence.

5.4 Disclosures that are unlikely to be accepted through the Second Incomes Campaign

Certain disclosures are unlikely to be accepted under the Second Incomes Campaign.

Disclosures that are found to be materially incorrect or incomplete when checked by HMRC are unlikely to be accepted under the Second Incomes Campaign.

Also unlikely to be accepted are disclosures from customers where HMRC has notified their intention to open an enquiry or compliance check before the customer has notified their intention to submit a disclosure under the campaign. Those who want to disclose liabilities under these circumstances should tell the person conducting the enquiry. A full and early disclosure will influence the amount of penalty HMRC seeks in the ongoing enquiry or investigation.

Instances involving disclosures where HMRC believes the money that is the subject of the disclosure is the proceeds of serious organised crime aren’t likely to be accepted. Examples of this include VAT fraud, VAT bogus registration fraud, organised tax credit fraud and instances where there is wider criminality (such as an ongoing police investigation).

An important factor for HMRC in deciding if they will carry out civil or criminal investigations into cases of fiscal fraud is whether the taxpayer(s) has made a complete and unprompted disclosure of any amounts evaded or improperly reclaimed. Whilst HMRC would consider each case on its merits a complete and unprompted disclosure would generally suggest that a civil (rather than criminal) investigation was appropriate.

Also, if you were eligible for any past HMRC disclosure opportunity and you didn’t disclose at that time, HMRC may find it hard to accept that anything you disclose through the Second Incomes Campaign wasn’t a result of something you did deliberately. HMRC would expect you to calculate your penalty and the number of years you should pay to reflect deliberate action. If you don’t, HMRC may not accept your disclosure. You will be in this category if you haven’t yet come forward and would have been covered by a previous campaign.

5.5 If you disclose very serious tax problems

HMRC can’t offer immunity from prosecution but an important factor when they are deciding whether to carry out criminal investigations into cases of tax fraud is whether you have made a complete and unprompted disclosure of any amounts evaded or improperly reclaimed.

5.6 If you leave something important out of your disclosure

If after submitting your disclosure you realise you have missed something out, you should immediately contact HMRC to make an amendment. You can do this by contacting the helpline on Telephone: 0300 123 0945 or by forwarding your amendment in writing to the following address:

HMRC Revenue and Customs
Individual and Small Business Compliance
Second Incomes Campaign Team S0790
Newcastle
NE98 1ZZ

If HMRC receives information indicating that your disclosure was incorrect, they have the right to look at your tax affairs again.

HMRC may write to you about the information they have received and if necessary, will send you assessments to collect any extra tax due. These penalties are likely to be higher than those offered by the Second Incomes Campaign.

5.7 Information received after disclosure accepted

HMRC will continue to seek new information. They will use it to identify customers where a disclosure should have been made or where the disclosure made isn’t what was expected based on the information HMRC holds.

5.8 If I disclose this liability could HMRC publish details about me?

In certain circumstances HMRC is able to publish the details of those penalised for deliberately failing in particular tax obligations. If you come forward as part of this campaign you will earn the maximum reduction of any relevant penalties for the quality of disclosure, and HMRC won’t publish your details if you do all of the following:

  • notify HMRC that you are going to make a disclosure
  • make a full disclosure including full payment of tax owed which proves to be both accurate and complete before the deadline you are given for doing so
  • cooperate fully with HMRC if they ask you for any further information

HMRC may include you in a list of deliberate defaulters if you don’t follow these steps.

6. Getting things right for the future

Once you have submitted your disclosure HMRC expects you to keep your tax affairs in order in the future. This means that you should continue to accurately declare your income and gains for those years that fall after the latest year you include in your disclosure. You should ensure any tax returns that are issued to you are returned with accurate information by the appropriate deadlines.

7. General information

7.1 Help and advice

If you have any questions not covered by this guide please phone the Second Incomes Campaign Helpline on Telephone: 0300 123 0945. Lines are open Monday to Friday 9am to 5pm.

Further guidance on Self Assessment tax returns is also available.

7.2 Customers with particular needs

If you need extra help to deal with the Second Incomes Campaign Team please get in touch. HMRC can help if:

  • English isn’t your first language
  • you want a copy of this guidance in Welsh
  • you would like HMRC to use a certain format to communicate with you - for example braille or Text Relay
  • you would like a copy of this guidance in audio or large print

Contact the helpline on yelephone: 0300 123 0945 or +44 300 123 0945 if dialling from outside the UK (Monday to Friday 9am to 5pm).

If you use Text Relay by text-phone, please dial 18001 + number. If you use Text Relay by telephone please dial 18002 + number.

7.3 Your rights and obligations

Read Your Charter to find out what you can expect from HM Revenue and Customs and what we expect from you.

7.4 If you’re unhappy with HMRC’s service

If you’re unhappy with HMRC’s service please phone the Second Incomes Campaign Helpline on Telephone: 0300 123 0945 or write to HMRC at the address below:

HMRC Revenue and Customs
Individual and Small Business
Second Incomes Campaign Team S0790
Newcastle
NE98 1ZZ

7.5 Privacy and confidentiality policy

The full protection of the Human Rights Act will continue to apply to you and HMRC has a strict policy regarding the privacy and confidentiality of customers’ personal information.

Read HMRC’s privacy policy in the Personal Information Charter.

7.6 Data Protection Act

HMRC is a Data Controller under the Data Protection Act 1998. HMRC holds information for the purposes specified in their notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.

HMRC may get information about you from others, or they may give information to them. If HMRC does, it will only be as the law permits to:

  • check the accuracy of information
  • prevent or detect crime
  • protect public funds

HMRC may check information they receive about you with what is already in their records. This can include information provided by you, as well as by others such as other government departments or agencies and overseas tax and customs authorities. HMRC won’t give information to anyone outside HMRC unless the law permits them to do so.

For more information see HMRC’s Data Protection - Information Charter.